* Stocks fall in Europe, Wall Street opens lower
* China central bank ready to ease policy if needed - Reuters report
* Australian dollar loses ground
NEW YORK, March 12 (Reuters) - Copper declined to near four-year lows and global stock indexes fell for a fourth day on Wednesday as increasing concern about China's economic slowdown sent a wave of unease through financial markets.
Copper, often regarded as a proxy for China's economic fortunes, hit its lowest level since 2010 after Shanghai copper futures had again fallen by their 5 percent daily limit.
U.S. stocks opened lower, putting the S&P 500 on track for a third straight decline, on concerns about China, with recent data suggesting an economic slowdown in the world's second-largest economy.
Copper's fall follows China's first domestic bond default which has raised concerns about a possible unravelling of the many loan deals which have used the metal as collateral.
Chinese firms that have difficulty raising loans have often bought copper as security for funds they borrow, but the 14 percent drop in its value this year is making banks more wary about the practice.
Copper has been in a free fall for the last three days, while the concerns also weakened the Australian dollar, the Chilean peso and other currencies closely linked to commodities markets.
Copper on the London Metal Exchange slid to a session low of $6,376.25 a tonne, its weakest since July 2010, before recovering to trade at $6,470, down only 0.1 percent.
On Wall Street, the Dow Jones industrial average fell 41.68 points or 0.25 percent, to 16,309.57, the S&P 500 lost 5.76 points or 0.31 percent, to 1,861.87 and the Nasdaq Composite dropped 9.573 points or 0.22 percent, to 4,297.614.
"There are enough investors willing to take profits here that they continue on any bad global news to start to make some sales. Here, certainly China is a big part of it and the Ukraine situation is really not cleared in any way," said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.
The S&P materials index was down 0.7 percent.
Shares of Fannie Mae dropped 15.4 percent to $3.42 while shares of Freddie Mac were down 17.3 percent at $3.34 after the leaders of the Senate Banking Committee on Tuesday announced an agreement on legislation to wind down the government-owned mortgage financiers.
The yield premiums on Fannie Mae and Freddie Mac bonds over Treasuries shrank broadly on the view the Senate plan would assure the government's guarantee the GSE's existing debt. For example, the yield gap between five-year Fannie Mae note due February 2019 over five-year Treasuries narrowed 0.005 percentage point to about 0.15 percentage point.
In Europe, bourses from London to Lisbon tumbled and safe-haven German government bonds were in demand as the jitters added to the effects of the tug-of-war over Crimea, which has pitted Russia against Ukraine and the West. European shares were down 1.2 percent, while an index of global stocks was down 0.8 percent.
Miners and other stocks sensitive to global growth trends came under pressure.
In the foreign exchange market, the Aussie, which fell in the final quarter of last year but has recovered some ground since mid-January on the back of improving domestic growth, was down 0.2 percent after losing 1 percent in the U.S. trading day on Tuesday. The Chilean peso was down 0.5 percent.
Economists are concerned that recent moves by Beijing to stamp out speculation on its rising currency and overly easy lending may have overshot and will damage the world's second largest economy.
This is adding to broader strains on emerging markets as they try to cope with shifts in global attitudes while recovering economies such as the United States begin to phase out the cheap money churned out in recent years.
Investors were hoping Chinese data on industrial output, retail sales and urban investment on Thursday might show where the economy is heading.
Reuters reported that China's central bank is prepared to loosen monetary policy if economic growth slows further by cutting the amount of cash that banks must keep as reserves. This was a positive sign for markets, but also a possible indication of Beijing's growing nervousness.
Citing sources involved in internal policy discussions, the report said an easing would happen if growth slips below 7.5 percent, and would be on top of money market operations and currency intervention through state banks that traders say have already loosened monetary conditions.
With the tensions over Ukraine in the background, U.S. government bonds began to gain after days of treading water.
The 10-year U.S. Treasury note last traded up 10/32 in price to yield 2.73 percent.
According to a draft document seen by Reuters, European Union member states have agreed on the wording of sanctions on Russia, including travel restrictions and asset freezes against those they feel are responsible for violating the sovereignty of Ukraine.
Oil prices were lower as well, with Brent crude down 32 cents at $108.23 and U.S. oil futures down $1.41 at $98.62.