* Global stocks fall 0.1 percent, second day of declines
* Euro zone government bond yields off lows, oil slips
* Yen broadly gains on weakness in equity markets (Updates prices, adds U.S. outlook, quotes)
By Atul Prakash
LONDON, Aug 27 (Reuters) - World stocks lost ground for a second straight day on Thursday and the yen broadly gained, with equity investors avoiding risky assets and preferring to take profits from a rally to 10-month highs this week.
U.S. stock futures pointed to a subdued start on Wall Street.
Asian markets led the decline, with Japan's Nikkei average falling 1.6 percent and Shanghai shares down 0.7 percent. The pan-European FTSEurofirst 300 fell 0.3 percent, dragged down mainly by beverages and chemical stocks.
The MSCI world stock index, which hit its highest level since early October on Tuesday, was down 0.1 percent at 275.43 points after falling as low as 275.18, while emerging markets stocks fell 0.5 percent.
"Whilst the rally hasn't truly run out of steam, it has slowed down over the past couple of sessions as investors take a breather," said Brian Myers, analyst at ODL Securities.
"A sense of caution seems to be the overwhelming factor, as lessons have been learnt from those still tending burnt fingers," London-based Myers added.
Macroeconomic data continued to support the view that the global economy was on a recovery path, but investors paused at the fag end of the European summer holiday season.
Figures showed that German consumer sentiment rose to its highest level in 15 months heading into September as lower prices and a stable labour market left consumers more willing to spend, the GfK market research group said.
Consumer confidence in Italy rose by more than expected in August to its highest level since March 2007, British house prices rose for the fourth month running and at their fastest monthly rate in 2-1/2 years in August and Australian business investment surged past all expectations last quarter.
"The trend of the last few weeks looks set to continue, if not at the same pace," said Lars Kreckel, equity strategist at Exane BNP Paribas.
"A lot of people are still under-invested in equities and are looking to push back into them which should ensure shares won't see any downside ... as long as data stays positive."
A Reuters poll showed 44 U.S., British, continental European and Japanese fund management companies held an average of 57.1 percent of their portfolio holdings in equities in August, barely changed from 57.0 percent in July.
BOND YIELDS OFF LOWS
Ten-year euro zone government bond yields rose, pulling away from multi-month lows earlier in the session, as thin volumes made the market behave erratically in the face of inflation and consumer morale data.
Bund futures had earlier edged to their highest level since late April, supported by weaker-than-expected currency bloc money supply data.
"Bunds have been on a yo-yo today on account of the poor volumes, as have equities and at various times both markets have been paired rather than trading in opposite directions," said a trader in London.
The yen rose broadly, hitting its highest level in over a month against the dollar, as investors turned towards relatively safer and low-yielding assets such as the Japanese currency.
At one stage, the dollar fell to a low around 93.38 yen, its lowest level since late July, before paring losses. "The yen is strengthening today on doubts about the view that China will pull the global economy out of recession," said Lutz Karpowitz, currency strategist at Commerzbank in Frankfurt.
"Also, Asian equities were in minus territory, which is supporting the yen."
European credit derivatives indexes edged wider on weaker stock markets. The investment-grade Markit iTraxx Europe index was at 92.5 basis points, according to data from Markit, 0.5 basis points wider versus late on Wednesday.
Among commodities, U.S. crude oil briefly dipped below $71 a barrel, well off 10-month highs earlier this week as swollen crude and distillate inventories in the United States, the world's largest fuel consumer, weighed on sentiment. It was last at $71.08 a barrel. (Additional reporting by Naomi Tajitsu, Ian Chua, George Matlock, Simon Falush and Dominic Lau; Editing by Jon Boyle and Andy Bruce)