* Rally in equities pauses, banks under pressure
* U.S. crude and copper also lower, dollar bounces
* MSCI World stock index falls 0.5 percent
By Ian Chua
LONDON, Sept 18 (Reuters) - Global equities fell on Friday
as investors took stock of recent gains that pushed European and
Asian markets to multi-month highs, giving a reprieve to the
downtrodden dollar and shoring up government bonds.
Commodity prices also beat a hasty retreat with oil <CLc1>
shedding 82 cents to $71.67 a barrel and copper <MCU3=LX>
falling 1.5 percent to $6,265 a tonne. Spot gold <XAU=> was
little changed at around $1,010 an ounce.
The recent rally in equities has meant that valuations are
starting to look stretched again, said Mitul Kotecha, head of
global fx strategy at Calyon.
"For instance the price/earnings ratio on the S&P 500 <.SPX>
has risen to its highest level since January 2004, perhaps
hinting at the need for a degree of investor caution in
the days and weeks ahead."
Growing optimism about a global recovery from the worst
recession since at least World War Two, fuelled by a string of
upbeat economic data, has helped boost many assets over the past
few months.
According to global fund tracker EPFR, investors have been
drawing money market funds and allocating them to developed
market equity and bonds, including Europe Equity Funds.
During the second full week of September, $47.2 billion were
taken out of money market funds, marking the second biggest
weekly outflow this year and taking total year-to-date outflows
to $331.9 billion, around 10 percent of their assets, EPFR said.
"Whilst it is almost inevitable that there will be a
pullback on some days, it is the strength of the dips that will
be in focus," said John Murphy, an equity analyst at ODL
Securities.
"If we truly are in a bull run, investors will buy the dips.
If confidence is fragile, any dip could be perceived as the
start of the slump. Markets tend to over react on both the long
and short side, so today could well be a barometer for market
confidence."
The MSCI's all-country world stock index <.MIWD00000PUS>,
which scaled an 11-month peak on Thursday, fell 0.5 percent,
while the FTSEurofirst 300 index <> of top European shares
also shed 0.5 percent.
Banks <.SX7P>, which have surged more than 170 percent since
the March lows, were among top losers with Standard Chartered
<STAN.L> and Barclays <BARC.L> all under pressure.
The benchmark MSCI emerging market stock index <.MSCIEF>,
having reached a 12-month high on Thursday, lost 0.5 percent.
Earlier, Japan's Nikkei <> closed 0.7 percent lower.
The decline in equities helped the dollar find a steadier
footing against a basket of major currencies. The dollar index
<.DXY> rose 0.6 percent, after earlier plumbing a 12-month low
at 76.010.
Since March, the dollar has been on a slippery slope as
investors shifted into riskier assets on increasing signs that
the global economy is on the mend.
Against the backdrop of weaker equity and commodity markets,
lower risk government bonds gained ground, driving yields lower.
The euro zone's benchmark 10-year Bund yield <EU10YT=RR>
slipped about 2 basis points to 3.33 percent, while its U.S.
counterpart <US10YT=RR> was little changed at 3.39 percent.
(Additional reporting by Atul Prakash; Editing by Andy Bruce)
