GLOBAL MARKETS-World equities fall on valuation fears, bonds gain

* MSCI World index down 0.7 pct, European index down 1.4 pct

* Thursday's sharp sell-off on Wall Street takes global toll

* All three major Wall Street indexes fall

* Bonds rise on safety bid (Updates with Wall Street stocks lower, changes prices)

By Herbert Lash

NEW YORK (Frankfurt: HX6.F - news) , April 11 (Reuters) - Global equity markets fell on Friday as fears on Wall Street about over-stretched stock valuations spread to Asia and Europe, pushing investors to the safety of bonds.

The Nasdaq composite, which has been pounded in recent days as investors bailed out of high-flying technology and biotechnology shares, slipped again on Friday. The index on Thursday recorded its biggest drop in two-and-a-half years.

The benchmark S&P 500 index was also lower and was on target for its worst week since January. The Nasdaq biotech index , after falling more than 20 percent from a recent high, rose 0.4 percent.

Benchmark 10-year Treasuries notes were tracking the losses in stocks. With equities lower, the 10-year bond rose 8/32 in price to yield 2.627 percent.

"This equity market meltdown has brought a 'fear' bid into bonds," said Larry Milstein, head of government and agency trading at R.W (SES: E2:OJ4.SI - news) . Pressprich & Co. in New York.

A benchmark of global equities fell to a two-week low, spurred by a broad risk-averse tenor among investors that led to sell-offs in higher-yielding currencies and emerging market assets.

"There's been contagion from the correction in the U.S. which is probably not over. But the fact is, this is mostly a U.S. correction," said David Thebault, head of quantitative sales trading at Global Equities in Paris.

"People are getting out of overvalued sectors and looking for bargains elsewhere. The market's positive longer-term trend is still intact, this pull-back will just remove the froth," he said.

The slide in global equities persisted in the wake of disappointing quarterly results from JPMorgan Chase & Co (NYSE: JPM - news) . , the biggest U.S. bank. This exerted more pressure on the benchmark Standard & Poor's 500 index, which on Thursday suffered its biggest one-day drop in two months.

Shares of JPMorgan sank 3.1 percent to $55.63, and the S&P financial index lost 0.6 percent and was the worst performing S&P sector.

MSCI (NYSE: MSCI - news) 's all-country world equity index fell to lows last seen in late March and was last trading down 0.7 percent.

European technology stocks led sectoral falls with a 2.5 percent decline, echoing U.S. declines. The tech sector in Europe had rallied more 40 percent since November 2012 through the start of April.

The pan-European FTSEurofirst 300 of leading regional shares closed down 1.4 percent at 1,312.92.

The Dow Jones industrial average fell 85.64 points or 0.53 percent, to 16,084.58, the S&P 500 lost 7.99 points, or 0.44 percent, to 1,825.09, and the Nasdaq Composite dropped 20.664 points, or 0.51 percent, to 4,033.443.

The dollar index, which measures the greenback against six major currencies, rose 0.04 percent, and the dollar edged higher against the yen, up 0.11 percent. The euro rose slightly against the dollar.

"Bad news for the world is good news for the dollar," said Steven Englander, managing director and global head of G10 FX strategy at CitiFX in New York. "Once fears about the equity market intensified, they picked up a more conventional type of mode to buy the dollar."

Brent oil futures gained slightly. Brent crude was up 16 cents at $107.62 a barrel. U.S. oil was up 77 cents at $104.16 a barrel. (Reporting by Herbert Lash; Additional reporting by Atul Prakash in London; Editing by Leslie Adler)