GLOBAL MARKETS-Equity rally pauses, dollar rebounds

* Global equities ease but off earlier lows

* U.S. crude and copper also lower, dollar rebounds

* MSCI World stock index falls 0.3 percent

(Updates prices, adds Wall Street outlook)

By Ian Chua

LONDON, Sept 18 (Reuters) - Global equities came under pressure on Friday after having scaled an 11-month peak as investors took stock of recent hefty gains, giving the downtrodden dollar a reprieve and shoring up government bonds.

Wall Street, which snapped a three-day run-up in the previous session on concerns recent gains were overextended, showed some signs of steadying with U.S. stock futures flat to 0.1 percent higher.

Commodity prices also retreated. Oil shed 62 cents to $71.86 a barrel and copper fell 1.3 percent to $6,282 a tonne. Spot gold was little changed at around $1,010 an ounce.

"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, slipped just 0.3 percent, having earlier fallen as much as 0.6 percent, while the FTSEurofirst 300 index <.FTEU3> of top European shares edged down 0.2 percent.

Banks <.SX7P>, which have surged more than 170 percent since the March lows, were among top losers with Standard Chartered and Barclays all in the red.

Lloyds fell 0.8 percent after British regulators set tougher-than-expected terms for its exit from a government scheme to insure it against credit losses. See [ID:nLI109343]

The benchmark MSCI emerging market stock index <.MSCIEF>, which reached a 12-month high on Thursday, lost 0.2 percent. Earlier, Japan's Nikkei <.N225> closed 0.7 percent lower.

OPTIMISM

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.

The modest decline in equities helped the dollar find a steadier footing against a basket of major currencies. The dollar index <.DXY> rose 0.4 percent on the day to 76.461, rebounding from a fall to a 12-month low of 76.010 earlier.

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.

"It's possible on Friday people are taking profits. It's too early to tell whether it marks the beginning of a trend because there've been no notable catalyst for now ...," said Geoffrey Yu, currency strategist at UBS in London.

The yen was also broadly weaker and stayed pressured after Finance Minister Hirohisa Fujii said he did not want to be perceived as backing a strong yen.

The dollar was up 0.4 percent on the day at 91.37 yen and the euro rose 0.1 percent to 134.30 yen .

Against the backdrop of modestly weaker equity and commodity markets, lower risk European government bonds held their ground.

The euro zone's benchmark 10-year Bund yield was flat at 3.339 percent. U.S. Treasury yields were slightly higher as the market braced for next week's near record amount of Treasury supply. The U.S. 10-year yield edged up about one basis point to 3.396 percent. (Additional reporting by Atul Prakash and Emelia Sithole-Matarise; Editing by Andy Bruce)