GLOBAL MARKETS-Surging bond yields lead global equities lower

(Adds oil, gold settlement prices)

* Yield on 10-year Treasury briefly spikes to 1.6%

* Wall Street tumbles as inflation fears nag

* Copper nears decade peak, oil prices settle up

* Reuters Live Markets blog:

* Graphic: Global asset performance http://tmsnrt.rs/2yaDPgn

* Graphic: World FX rates http://tmsnrt.rs/2egbfVh

By Herbert Lash and Marc Jones

NEW YORK/LONDON, Feb 25 (Reuters) - A jump in benchmark U.S. Treasury yields on Thursday led a gauge of global equity markets to retreat as investors sold the high-flying tech stocks that fueled Wall Street's rally to record highs and took precautions against the threat of inflation.

Fears of rising consumer prices from ongoing central bank stimulus and its impact on global growth helped drive copper prices to their highest in almost a decade as investors scrambled to buy metals to guard against inflation.

Gold prices fell as much as 2% as the surge in Treasury yields and strong U.S. economic data dented demand for the traditional inflation hedge. Higher bond yields have increased the opportunity cost of holding bullion.

The 10-year Treasury note briefly spiked to yield 1.614% and later traded around the estimated 1.48% dividend yield of companies in the S&P 500, taking a bit of shine off of investing in more risky equities.

"Rates matter," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

"There's no capital risk with a 10-year," he said. "You'll get your principle back and all of a sudden it's competitive with stocks."

U.S. stocks tumbled, forcing a decline in European equities that had rallied earlier on a bigger rise than expected in euro zone economic sentiment data for February.

Investors are taking profits in the high-flying tech sector and moving into more conservative bonds with their rising yields, said Jeffrey Carbone, managing partner at Cornerstone Wealth in Huntersville, North Carolina.

"The market is starting to get a bit frothy," Carbone said. "The higher the yield on bonds, the more we see this push to move out of stocks."

Apple Inc, Tesla Inc, Amazon.com Inc , NVIDIA Corp and Microsoft Corp were the biggest drags on the S&P 500 and Nasdaq.

MSCI's all-country world index fell 0.95% to 668.98, also pulled down by the big U.S. tech names, a large component of the global stock benchmark.

Equity declines were less pronounced in Europe, with the broad pan-regional FTSEurofirst 300 index closing down 0.18% to 1,585.48.

On Wall Street, the Dow Jones Industrial Average fell 1.25%, the S&P 500 lost 1.83% and the Nasdaq Composite dropped 2.58%.

"There are two clear stories now," said CMC Markets senior analyst Michael Hewson. "You have the concerns about rising yields, and they are continuing to move higher today, and then you have got an economic recovery story, which is helping lift the more moderately-valued parts of the market."

Bond traders pushed up a closely watched part of the Treasury yield curve that measures the difference between yields on two- and 10-year notes. The gap, seen as an indicator of economic expectations, widened as much as 132 basis points, the most since late 2016.

Euro zone bond yields also spiked despite the European Central Bank saying it was closely watching their rise, as inflation fears continued to a sell-off in Treasury market.

German 10-year yields are poised for their biggest monthly gain since January 2013. The region's benchmark rose to -0.214%, a high last seen in March when markets crashed.

The dollar index fell to a seven-week low while the Australian and Canadian dollars both hit three-year high as global growth optimism lifted commodity prices worldwide.

The dollar later rebounded in the latest example of how currency markets have recently taken cues from bonds moving on changing outlooks for economic growth and inflation.

The dollar index rose 0.1%, with the euro up 0.15% to $1.2182. The Japanese yen weakened 0.31% versus the greenback at 106.19 per dollar.

had climbed 1.6% to $9,457 a tonne by 1715 GMT, after hitting its highest since August 2011 at $9,617.

Three-month copper on the London Metal Exchange climbed 1.6% to $9,457 a tonne, about 6% below its record high of $10,190 a tonne hit in February 2011.

Oil prices held near 13-month highs, with profit-taking limited by the Federal Reserve's assurance that U.S. interest rates will stay low and a sharp drop in U.S. crude output last week due to the winter storm in Texas.

Brent crude futures settled up 31 cents at $63.53 a barrel. U.S. crude futures fell 16 cents to settle at $66.88 a barrel.

U.S. gold futures settled down 1.3% to $1,775.40 an ounce.

(Reporting by Herbert Lash, additional reporting by Stephen Culp in New York, Marc Jones in London and Shreyashi Sanyal in Bengaluru, editing by Hugh Lawson and Lisa Shumaker)