* MSCI World index falls 0.5 pct, MSCI Europe down 1.2 pct
* Sharp sell-off on Wall Street hits global stocks
* Tech shares suffer the most, valuations high
By Atul Prakash
LONDON, April 11 (Reuters) - Global equities slipped to a two-week low on Friday as a sell-off on Wall Street led by technology and biotech shares and triggered by growing concerns that valuations are over stretched spread to Asia and Europe.
With stocks out of favour, government bonds were set to benefit, with the yield on the benchmark 10-year U.S. Treasury note falling to its lowest since early March.
However, Greek 10-year government bond yields rose as investors booked profits on a strong rally in the run-up to the country's first debt sale since it defaulted two years ago.
The MSCI All-Country World index of shares fell 0.5 percent by 1024 GMT to its lowest level since late March, the MSCI Europe dropped 1.2 percent, while the STOXX Europe 600 index was down 1.3 percent.
That followed a 3.1 percent slide in the tech-heavy U.S. Nasdaq index on Thursday, the biggest drop in two-and-a-half years, and a 2.4 percent decline in Japan's Nikkei Average on Friday, the biggest weekly fall since the March 2011 tsunami and nuclear disaster.
"The sell-off in tech stocks in the United States, where gains were quite strong, is affecting other markets because the U.S. is still setting the tone for global markets," said Klaus Wiener, head of tactical asset allocation and chief economist at Generali Investments Europe, which manages $500 billion.
"But I don't think this is the start of a longer correction as the U.S. economy will gain further momentum. With key interest rates pinned to the zero-bound, we are still in a low-yield environment. Investors' hunger for yield will ensure that every time equity markets correct, demand will rise."
What increasingly looks like a major portfolio shift from momentum plays in U.S. technology and biotechnology stocks was having a knock-on effect across all regions and sectors, pressuring even defensive shares.
Momentum investing involves buying stocks that are already trending higher, often taking their price/earnings ratios into the stratosphere. When the momentum turns, prices can fall rapidly as investors rush to the exits.
"The sell-off is the result of increasing concerns about the future earnings growth," Christian Stocker, equity strategist at UniCredit in Munich, said. "Valuations are high compared to previous years and the trend of earnings estimates is very muted in the U.S. and almost flat in Europe."
Technology stocks led the retreat in Europe, with the sector index, following its U.S. counterpart, down 2.4 percent on growing fears the shares have risen too far, too fast and are now relatively expensive compared with the broader market. The European healthcare index was down 1.8 percent.
The STOXX Europe 600 Technology index, which surged nearly 50 percent in two years to the end of December 2013, is down about 3 percent so far this year.
According to Thomson Reuters Datastream, the tech sector is the most expensive in Europe, trading at 19 times its 12-month forward earnings, against a 10-year average of about 16 times, and 14 times for the broader STOXX 600 index.
"It's a pre-Easter, pre-earnings season correction and represents an opportunity to invest in the value part of the stock market as the cyclical shares suffer from past hype," said Didier Duret, global chief investment officer at ABN-AMRO Private Banking.
The dollar stabilised after five sessions of losses against a basket of currencies. The dollar index was flat at 79.395, having hit a three-week low of 79.33 on Thursday. U.S. 10-year yields, which often correlate with the dollar, were last at 2.641 percent in Europe, the lowest in around a month.
On the commodities front, the recent fall in the dollar and weaker equities helped safe-haven gold to trade near its highest in 2-1/2 weeks and stay on track for its best week in a month.
Oil remained soft in the wake of Thursday's disappointing trade data from China and the prospect of increased supply. Brent crude fell 0.3 percent to $107.17 a barrel.
London nickel rose 2.3 percent to a 13-month high and headed for its ninth weekly gain in 10 weeks as a ban on ore exports from Indonesia fuelled prices of the metal, mainly used to produce stainless steel. (Additional reporting by Wayne Cole in Sydney; Editing by Catherine Evans)