* Caution reigns after disappointing China inflation reading
* Bond yields, oil prices hit fresh lows on demand fears (Adds declines in U.S., Europe equities)
By Lionel Laurent
LONDON, Oct 15 (Reuters) - Global stocks, bond yields and commodity prices slumped on Wednesday as investor fears over the state of the global economy intensified after U.S. producer prices fell for the first time in more than a year.
U.S. equity futures were down 1.2 percent - with big blocks of shares being sold - and the pan-European FTSEurofirst 300 index fell 1.9 percent after the release of the data, which fuelled worries of disinflation in the U.S.
Greece's benchmark equity index fell as much as 10 percent, though by 1307 GMT it had pared its losses to a drop of around 7 percent.
"There's been a big acceleration of the sell-off in stocks, with a spike in risk aversion spreading across the board to bonds and the currency market, and even a return of stress around Greek assets," Alexandre Baradez, chief market analyst at IG France.
"The newsflow is quickly deteriorating, including today's U.S. data. It's nothing to reassure investors. All the ingredients are there for further losses."
Market volatility has surged in recent weeks as investors weigh the timing of expected interest rate increases, especially in the United States, against disappointing macroeconomic signals such as a lower-than-expected inflation reading from China.
Investors sought refuge from cooling economic activity in safe-haven government bonds across the euro zone, with German bund yields hitting a record low. Pressure is growing on the European Central Bank to ease monetary policy further to spur growth in the region.
"With deflation worries still very much at the fore of the euro area and the pressure on the ECB to take further action in coming months, Bunds will remain underpinned in the near term," said Nick Stamenkovic, bond strategist at RIA Capital Markets.
After a stable start to the European trading day, stocks were firmly in the red by afternoon, with the MSCI All-Country World index down 0.3 percent.
Britain's FTSE 100 benchmark stock index was also down 1.6 percent, dragged lower by a 24 percent fall in the share price of drug company Shire after U.S. rival and suitor AbbVie warned it might reconsider plans to buy Shire.
Worries over the economic recovery also kept commodities under pressure. Brent crude futures fell to a new four-year low of $83.95 per barrel and U.S. crude oil fell to $80.60 per barrel, stoking fears of further disinflation.
"The sharp decline in the price of crude oil is serving to increase downside risks to inflation in the near term," said Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi UFJ.
The oil price fall also affected currency markets, where the U.S. dollar hit a five-year high against the Canadian dollar and held firm near a 11-month peak against sterling. Investors resumed bullish bets on the dollar after a recent sell-off and stayed away from currencies grappling with disinflation.
"Clearly the correlation between oil and commodity prices on the Canadian dollar is playing out. The more oil prices fall, the more dollar/CAD will rise," said Jeremy Stretch, the head of currency strategy at CIBC World Markets.
Emerging markets in Russia and the Middle East, which depend on oil as a key revenue earner, were also hit: the rouble dipped to its weakest level on record, Russian government borrowing costs hovered at a five-year high and shares in Moscow fell to near their lowest level since 2009.
Russia's central bank stepped in to shift its currency-intervention threshold and hold auctions for banks to deposit dollars, but analysts remained sceptical of their success.
"If the oil price doesn't stabilise, there probably isn't much hope for the rouble," said Richard Segal, an emerging market strategist at Jefferies. The currency is down almost 20 percent this year. (Reporting by Lionel Laurent; Additional reporting by Blaise Robinson, Jamie McGeever, Anirban Nag, Marc Jones and Marius Zaharia; Editing by Toby Chopra, Larry King)