GLOBAL MARKETS-Global shares retreat; yen, govt debt gain

* European, Asian shares fall on growth worries

* Aussie dlr at 2-wk low, mkt trims bets on large rate rise

* Wall Street poised to head lower

By Emelia Sithole-Matarise

LONDON, Oct 28 (Reuters) - World stocks and high yielding growth-related currencies slid on Wednesday, boosting safe-haven government debt as investors fretted about the pace of economic recovery after disappointing U.S. consumer confidence data.

The yen and the U.S. dollar edged higher as traders trimmed positions and reduced risk exposure, while oil fell below $79 a barrel, giving up some of the previous day's percent gains as equities extended losses.

European shares hit a three-week low, led by sharp falls in banking shares after Santander reported a 2.8 percent fall in net profit and on concerns about the rescue of "bad banks" in Ireland.

U.S. equity futures were down 0.6 percent , pointing to further losses on Wall Street with investors bracing for durable goods data and new home sales figures for further insights into the health of the world's biggest economy.

The Conference Board's weaker-than-expected U.S. consumer confidence index for October on Tuesday revived growth worries, cooling investor appetite for riskier assets like equities and higher yielding currencies.

"It's giving the bears something to shout about. There's still a lot of double dippers out there who don't believe this is for real and don't think the economy is going to turn," said Kenneth Broux, a market economist at Lloyds TSB.

The pan-European FTSEurofirst 300 index <.FTEU3> was down 1.7 percent by 1152 GMT, reversing the previous day's gains.

The MSCI's all-country world stocks index <.MIWD00000PUS> shed 0.9 percent to its lowest in three weeks. Its emerging market sub-index <.MSCIEF> was down over 2 percent and Japan's Nikkei <.N225> closing down 1.35 percent.

The Australian dollar fell to a two-week low after consumer price inflation was generally in line with forecasts but not strong enough to justify expectations for an aggressive interest rate rise by Australia's central bank next week. [ID:nSYD541217]

NORWEGIAN RATE HIKE EXPECTED

In Europe, focus is on Norway with Norges Bank expected to become the first European central bank to raise interest rates since the global financial crisis.

Euro zone government bonds and U.S. Treasuries gained traction on the back of falling equities.

The benchmark 10-year Treasury note yield was down about one basis point at 3.445 percent as the market also awaited the sale of $41 billion in five-year notes, part of this week's record $123 billion supply.

Strong demand at Tuesday's $44 billion sale of 2-year notes had helped soothe worries about waning demand.

"With the global tone of equity markets weakening we think a bullish fixed income correction is becoming increasingly likely," Societe Generale analysts said in a note. (Additional reporting by Ian Chua, editing by Mike Peacock)