Global shares fall on China margin crackdown, dollar gains

By Herbert Lash

NEW YORK (Reuters) - Global equity markets fell on Friday as a crackdown on margin lending in China sent ripples around the world, while the dollar gained on rising U.S. consumer price data that should keep the Federal Reserve on track to 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, which has pushed trading volumes to new highs.

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's all-country world index of equity performance in 46 countries fell 0.98 percent, while the FTSEurofirst 300 index of top European shares fell 1.6 percent to 1,608.93.

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 278.2 points, or 1.54 percent, to 17,827.57. The S&P 500 slid 25.35 points, or 1.2 percent, to 2,079.64 and the Nasdaq Composite lost 78.88 points, or 1.58 percent, to 4,928.91.

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, 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.

The dollar was up marginally against the yen at 119.00 yen . The euro rebounded, rising 0.24 percent at $1.0786. The dollar index was up 0.13 percent at 97.540 .

U.S. Treasury yields rose on the consumer price data.

Benchmark 10-year notes were last down 7/32 in price to yield 1.9018 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 up 13 cents at $64.11 a barrel. U.S. crude for May was down 57 cents at $56.14 a barrel.

(Reporting by Herbert Lash; Editing by Meredith Mazzilli)