GLOBAL MARKETS-Shares fall on China margin crackdown, dollar eases

* Wall Street, European shares also hit by corporate earnings

* Dollar retreats even as U.S. inflation creeps up

* U.S. Treasury yields also pare gains, fall

* German 10-year bund yields fall to new record low (Adds close of European bond, stock markets)

By Herbert Lash

NEW YORK, April 17 (Reuters) - Global equity markets fell on Friday on reports about a crackdown on margin lending in China, while the dollar retreated even as U.S. consumer price data added to the view the Federal Reserve will raise interest rates this year.

China's securities regulator warned investors to be cautious as Chinese shares hit seven-year highs after seven weeks of gains. Retail investors are borrowing record amounts of money to buy stocks, pushing trading volumes to new highs. China on Friday allowed fund managers to lend stocks for short-selling and expanded the number of stocks investors can short sell to increase the supply of securities in the market.

Stocks in Europe and on Wall Street fell more than 1 percent on the Chinese news and on worries Greece may run out of money as debt repayments loom. Peripheral euro zone government debt yields rose while core German bund yields hit a new record low.

Prospects have dimmed that Athens can strike a reform deal at a meeting next Friday to unlock much-needed bailout funds.

"China in general has been tightening up on some of the excesses in lending," said Rick Meckler, president of hedge fund LibertyView Capital Markets in Jersey City, New Jersey. "It's just another area that makes people think globally there's a bit of a top to this recent rally."

MSCI (NYSE: MSCI - news) 's all-country world index of equity performance in 46 countries fell 0.84 percent, while the FTSEurofirst 300 index of top European shares closed down 1.8 percent to 1,607.03. Germany's DAX fell 2.6 percent.

Traders said the European and U.S. sell-off was worsened by the expiry of futures and options in Europe and options in the United States. Disappointing corporate reports on both sides of the Atlantic also weighed on the market.

The Dow Jones industrial average fell 240.93 points, or 1.33 percent, to 17,864.84. The S&P 500 slid 20.74 points, or 0.99 percent, to 2,084.25 and the Nasdaq Composite lost 71.39 points, or 1.43 percent, to 4,936.40.

U.S. consumer prices rose 0.2 percent in March, propelled by higher costs for gasoline and housing. Closely watched core consumer prices rose 1.8 percent year-on-year, inching closer to the Fed's 2 percent target.

"We had a stronger core CPI (Other OTC: CPICQ - news) , which suggests that inflation is starting to firm as the Fed expected, and that's positive for the dollar," said Vassili Serebriakov, currency strategist at BNP Paribas (Xetra: 887771 - news) .

The dollar retreated from earlier gains. The greenback fell 0.12 percent to 118.85 yen. The euro rebounded, rising 0.3 percent at $1.0792. The dollar index was up 0.11 percent at 97.527.

U.S. Treasury priced rebounded.

Benchmark 10-year notes were last up 2/32 in price to yield 1.8705 percent. The yield on 10-year German bunds fell to an all-time low of 0.05 percent.

Brent crude pared early losses to rally above $64 after military units protecting the largest oilfields in Yemen handed their security to armed local tribes in a sign of the weakening grip of the Yemeni state over its resources.

Brent crude for June was down 4 cents at $63.94 a barrel. U.S. crude for May was down 79 cents at $55.92 a barrel. (Reporting by Herbert Lash; Editing by Meredith Mazzilli and Chizu Nomiyama)