* Spanish bank audit, French budget add to euro zone concerns * U.S. dollar and Treasuries gain on risk aversion NEW YORK, Sept 28 (Reuters) - Stocks in the United States and Europe declined and the euro dipped on Friday after initial optimism about Madrid's debt-cutting plans gave way to anxiety over its troubled banks and faltering global economic growth. Spain plans to ask for around 40 billion euros ($51.46 billion) in European aid to recapitalize its weak banks, Bank of Spain Deputy Governor Fernando Restoy said on Friday. An independent audit of Spanish banks by consultancy Oliver Wyman showed the country's troubled lenders would need 59.3 billion euros in extra capital to ride out a serious economic downturn. Spain will remain in focus, analysts said, with Moody's Investors Service expected to finish a credit rating review soon that may cost Madrid its sovereign investment-grade status. "At some point that (Spanish) credibility issue is likely to come back," said Derek Halpenny, European head of FX research at Bank of Tokyo Mitsubishi in London. "This is the fifth package - so the history of previous packages is that they weren't enough and lacked credibility." The MSCI index of world stocks was down 0.6 percent. Madrid's IBEX index led the falls, down 1.7 percent as an early lift from Spain's new round of spending cuts faded. The Dow Jones industrial average was down 48.96 points, or 0.36 percent, at 13,437.01. The Standard & Poor's 500 Index was down 6.30 points, or 0.44 percent, at 1,440.85. The Nasdaq Composite Index was down 20.40 points, or 0.65 percent, at 3,116.20. Equities were hit by a report showing business activity in the U.S. Midwest contracted this month for the first time in three years, while the dollar strengthened against the euro as investors shunned risk. "We had been seeing good data recently, but now we seem to be following the slowdown in China and Europe and we're seeing weakness," said Paul Nolte, managing director at Dearborn Partners in Chicago. Still, the S&P 500 index closed out the third quarter with a gain of around 5.8 percent. FRANCE ALSO IN THE SPOTLIGHT France was also under the microscope on Friday. President Francois Hollande's first annual budget, the country's toughest in 30 years, raised taxes to bring in 30 billion euros ($39 billion) to keep deficit-cutting promises. France announced its public-sector debt rose almost 2.0 percent to 91 percent of gross domestic product. Investors this week have again expressed concern that the euro zone is failing to gain control over its debt crisis though spending cuts announced in Spain's budget on Thursday helped the yield on Madrid's 10-year bond fall back below 6.0 percent. However, euro zone inflation data limited any falls in yields on Friday as a surprise rise in Eurostat's flash September reading cast doubts over the near-term chances of another interest rate cut from the European Central Bank. The euro fell 0.5 percent to $1.2847 as risk aversion rose after the U.S. data. The dollar gained 0.6 percent against the yen, while the euro managed to gain 0.1 percent against the Japanese currency. In other currency markets, China's yuan hit an all-time high versus the dollar, despite slowing Chinese economic growth recently. Concerns about progress solving the euro-zone debt crisis and slowing global economic growth helped to support U.S. Treasury prices. U.S. Treasury debt prices were higher. The benchmark 10-year U.S. Treasury note was up 6/32, with the yield at 1.6335 percent In commodity markets, gold surrendered gains on Friday as the U.S. dollar rallied but the metal stayed on track for its biggest quarterly gain in more than two years on the back of this month's central bank easing measures. Oil markets were steady with those investors more inclined to look at tight gasoline supply in the United States. Brent crude futures for November rose 0.1 percent to $112.17 per barrel. U.S. crude rose 0.2 Percent to $92.03.