* Dissipating Tropical Storm leaves cotton crops unscathed

* Fiber sinks to one-month low, extends losses on sell stops

* Global stocks slide as investors remain jittery over U.S. gov't shutdown

* USDA will not release World Agricultural Supply and Demand Estimates report on Friday

NEW YORK, Oct 7 (Reuters) - ICE cotton sank on Monday to post its biggest loss in over six weeks as the weakening of Tropical Storm Karen eased worry over crop damage in the United States, the world's top exporter, and as the U.S. government shutdown and budget impasse kept investors skittish.

The most-active December cotton contract on ICE Futures U.S. dropped 3.16 cents, or 3.6 percent, to settle at 84.02 cents a lb, after hitting 83.60 cents a lb, the lowest price in a month.

It was the second month's biggest daily loss since late August, leaving fiber as the worst performer in the Thomson Reuters-Jefferies CRB Index.

The biggest driver of the day's selling was the dissipation of Tropical Storm Karen, which left cotton fields in key growing regions of the United States unscathed.

"The disaster didn't happen. Once again in cotton, the market tends to move far beyond what is warranted. And when there is no damage, it has to make up for all the ill-gotten gains," said Ron Lawson, a partner at commodity investment firm LOGIC Advisors.

Worries over potential damage from the storm lifted cotton to a six-week high last week.

Investors remained rattled over the U.S. government shutdown, pressuring global financial markets and the U.S. dollar.

"With all this doubt and uncertainty, people sell," Lawson said.

The U.S. Department of Agriculture will not release its crop report and the World Agricultural Supply and Demand Estimates scheduled for Friday, because of the partial government shutdown.

The monthly report is avidly watched by cotton traders for global supply and demand estimates.

No date has been set for their release, a USDA spokeswoman said.

Sell stops were triggered as cotton fell past key support levels near 85.50-85.80 cents, dealers said.

The December contract closed below its 50-, 100-, and 200-day moving averages. (Reporting by Chris Prentice; editing by Jim Marshall)