* Wall Street shares retreat, S&P slips from record peak
* U.S. bond prices fall on doubts over low-rate outlook
* European, Japanese stocks rally after U.S. gains
* Gold slumps, clings above year lows
NEW YORK/LONDON, Dec 19 (Reuters) - U.S. government bonds sold off sharply on Thursday, one day after the Federal Reserve started winding down its crisis-era stimulus, while major U.S. equity averages slipped from record levels reached in Wednesday's post-Fed rally.
Gold slumped, extending months of weakness in the precious metal.
Markets took the Fed's $10 billion reduction in monthly stimulus well on Wednesday after months of agonizing over when the Fed would start cutting a bond-buying program that has helped underpin gains in riskier assets such as equities and commodities. Losses in Treasury prices, most directly affected by the Fed action, were modest.
Major U.S. averages retreated from records hit the previous day on the S&P 500 and the Dow after a few weak economic releases, including a surprising rise in weekly jobless claims and weaker-than-expected sales of existing homes.
The global MSCI World Index edged lower, losing 0.1 percent, as a result of weakness in China and the United States.
The bond market was a bit more worried on Thursday. Most issues were lower, with the 10-year benchmark Treasury note yield rising to 2.93 percent, but the most significant selling was in the five- to seven-year maturities on concerns about the Fed's eventual plans to raise interest rates.
The Fed's message that "tapering was not tightening" looked to have resonated in debt markets as Fed fund futures held broadly steady. A first hike in the funds rate is not fully priced in until about October 2015.
However, analysts expressed concerns that the Fed did not reduce its preferred target on the U.S. unemployment rate for when it would start raising rates. Currently that threshold is 6.5 percent, though outgoing Fed Chairman Ben Bernanke said on Wednesday that the threshold was not a trigger, and the Fed most probably would keep rates at the zero level long after the household rate fell below 6.5 percent.
"There's a bit of disappointment in the forward guidance," said John Bellows, portfolio manager at Western Asset Management in Pasadena, California, which manages $443 billion in assets. He said some in the market were looking for stronger language to show the Fed's commitment to near-zero interest rates.
"At the end of the day, it's all about commitment. It's all about it being bullet-proof, so it was kind of disappointing."
Impending auctions of five-year inflation-protected securities and seven-year notes also contributed to the selling pressure. The 10-year note was at 2.93 percent, below this year's 3 percent peak. The seven-year note fell a half point to boost its yield to 2.33 percent.
The Dow Jones industrial average fell 24.24 points or 0.15 percent, to 16,143.73, the S&P 500 lost 6.09 points or 0.34 percent, to 1,804.56 and the Nasdaq Composite dropped 14.632 points or 0.36 percent, to 4,055.432.
Commodity markets showed some trepidation. Gold slumped more than $25 to a six-month low of $1,194.80 an ounce, uncomfortably close to the year low at $1,180.74. Copper fell the most in nearly three weeks, losing 1.1 percent to $7,186 a ton.
The dollar was the other major beneficiary, as the euro fell to $1.3659 after hitting $1.3811 overnight.
EUROPE, ASIA RALLY ON FED
After Wall Street ended at a record high and Tokyo and some other parts of Asia posted big gains, European stocks raced up 1.5 percent in their biggest jump in over two months.
European debt markets barely blinked. Benchmark German borrowing costs were modestly lower, boosting the 10-year yield to 1.871 percent, while there was little reaction elsewhere in the region.
Still, tapering could be a double-edged sword for some countries since it could accelerate the "great rotation" of funds out of emerging markets into developed world assets.
Indonesia, the Philippines, Thailand and Malaysia have all been hit to a varying extent in recent months.
The Indonesian rupiah hit a fresh five-year low, though the Fed's move was welcomed by Deputy Governor of Bank Indonesia, Perry Warjiyo.
"The announcement provides more clarity for the direction of Fed monetary policy," Warjiyo told Reuters.
Others are also better prepared for the change. Notably the mood around India has improved enough that its central bank held off on hiking interest rates on Wednesday, surprising many.
Oil prices were higher. Brent crude rose 31 cents at $109.94 a barrel. U.S. oil futures rose 46 cents to $98.26 a barrel.
In Asia, stocks leapt from Sydney to Seoul. The slide in the yen was viewed as positive for Japanese exports and profits, and thus for the Nikkei, which climbed 1.7 percent to its highest in six years.
Shanghai was one of the few to break ranks with a drop of 0.6 percent after China's central bank declined to add liquidity to the banking system, pushing up money market rates.