* China's rate hike takes shine off global risk appetite
* Dollar gains, commodities slip after China's rate move
* Stocks slide, hurt by China, poor Apple and IBM results
* US Treasuries rally as stock losses spur safe-haven bid (Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Oct 19 (Reuters) - World stocks and commodity prices fell sharply on Tuesday after China, the engine of growth in an anemic global recovery, raised interest rates for the first time since 2007 to curb its booming economy.
Wall Street also was hit by fears that U.S. banks might be on the hook for billions of dollars in souring mortgage bonds, driving stocks to post their biggest loss in two months. For details see: [ID:nN19153115]
The dollar rallied broadly on China's unexpected 25-basis-point rate increase, a move that could mark the start of a more aggressive phase of monetary tightening in the world's fastest-growing major economy. [ID:nSGE69I0HU]
Crude oil prices slid more than 4 percent, its biggest single-day percentage decline since February, while copper tumbled from 27-month highs and gold shed as much as 2.7 percent, set for its largest one-day drop since early July.
The People's Bank of China said it would lift its benchmark one-year lending and deposit rate, effective on Wednesday, in a move analysts said may suggest Beijing and Washington are working together to ease rising currency tensions.
Traders cut their exposure to risk by taking refuge in U.S. government debt and selling the euro and commodity-sensitive Australian dollar. [ID:nN19134544]
The Australian dollar, which last week rose above parity with the U.S. currency for the first time since 1983, was hit hardest, slipping 1.5 percent. The euro and sterling also fell sharply.
Investors feared China's quarter-percentage point rise in interest rates could dampen Chinese and global growth while slowing China's voracious demand for commodities. [ID:nBJI002412]
"China's rate increase instantaneously pushed people to take risk off the table," said Boris Schlossberg, director of research at GFT Forex.
China "is trying to clamp down on growth and that's going to reflect badly on Australia, on Germany, on much of the world economy as it readjusts to the idea that Chinese growth may not be as torrid as expected," Schlossberg said.
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