* MSCI world equity index down 0.6 percent at 208.69
* Alcoa results spark earnings fears
* Government bonds, yen, dollar outperform
By Natsuko Waki
LONDON, April 8 (Reuters) - World stocks slipped for a third session in a row on Wednesday and government bonds and the low-yielding yen gained as poor earnings from U.S. aluminium group Alcoa sparked concerns about other corporates.
U.S. stocks fell more than 2 percent on Tuesday even before Alcoa reported a second consecutive quarterly loss on falling demand and sharply lower prices. First quarter earnings for S&P 500 companies are expected to fall by 37 percent, according to Thomson Reuters data.
Wednesday's pullback in shares comes as a month-long rally pushed them to a two-month high on Monday.
"The market is taking a reflective pause ... Obviously Alcoa was a massive disappointment and was worse than expected," said David Buik, partner at BGC Partners.
"This is barometer that perhaps first quarter earnings in the U.S. are not going to be good. After the fantastic run we have had it is probably folly to think we can crack on from the levels we have obtained over the last few weeks." The MSCI world equity index fell 0.6 percent. The FTSEurofirst 300 index lost 0.5 percent while emerging stocks dropped 1.6 percent.
U.S. stock futures were down around half a percent on the day, pointing to a weaker open on Wall Street.
According to Standard & Poors, the first quarter was the worst period for dividends since 1995 with companies reducing shareholder payments by 77 billion.
S&P said a record 367 of the approximately 7,000 publicly owned U.S. companies which feed their information to the index provider cut their dividend payment during the Q1 2009, up 332 percent on the year.
"The mammoth $77 billion reduction in dividend payments during the first quarter is eye popping," said Howard Silverblatt, senior index analyst at Standard & Poor's.
"The full impact of these cuts will be felt this quarter, when the dividend check is sent in the mail."
June bund futures rose 24 ticks. Ten-year U.S. Treasuries rose, pushing the yield down to 2.8854 percent.
The yen rose 0.6 percent to 99.96 per dollar. The Japanese government is expected to give details of new spending worth at least $100 billion or around 2 percent of GDP later on Wednesday.
On a positive note, Japan's service sector sentiment jumped to an eight-month high in March, boosted by the government's plan to hand out one-time payments to each individual.
The dollar, also a low-yielding currency, ticked higher against a basket of major currencies.
"We're seeing an ongoing correction in the sharp increase in risk appetite from last week," said Carl Hammer, currency strategist at SEB Merchant Bank in Stockholm.
U.S. crude oil fell 3 percent to $47.68 a barrel after weekly data showed U.S. crude inventories rose more than expected and falling stocks hit risk appetite. (Additional reporting by Joanne Frearson and Naomi Tajitsu; Editing by Ron Askew)