* Benchmark Treasury yield holds slightly above 2 pct
* Copper prices slump almost 7 percent
* U.S. stock market slips in volatile session (Recasts; updates prices, changes comment)
By Rodrigo Campos
NEW YORK, Sept 28 (Reuters) - Commodity prices, stocks and the euro fell on Wednesday on rising anxiety over a looming German vote to strengthen a fund set up to help euro zone nations deal with a debt crisis.
Infighting in the German ruling coalition turned investors skittish, as a failed vote would hamper the bloc's ability to prevent a Greek default that could send the global financial system into turmoil.
Global stocks rallied for three days on optimism Europe was getting a handle on the crisis, but the drop in stocks and the euro showed markets remain very sensitive to any signs of a setback.
An index of world stocks <.MIWD00000PUS> dropped more than
1 percent following its best day in a year and a half. Copper
prices
"There has been widespread liquidation across the grains, metals and oil markets ahead of the German Bundestag lower house vote on Thursday on whether to back new powers for the euro zone's rescue fund," said Phillip Streible, analyst at MF Global in Chicago.
The euro zone's sovereign debt issues have dragged on regional economies and threatened banks across the continent and beyond.
European Union and International Monetary Fund inspectors will return to Athens on Thursday to decide whether the Greek government has done enough to secure help from its neighbors and avoid a default. For details see [ID:nL5E7KS0AC].
"We are trying to avoid a Greek insolvency. But I cannot rule it out," German Chancellor Angela Merkel was quoted by Bild newspaper as telling her coalition, ahead of an increasingly complex vote amid concerns that German taxpayers' investments might have to be written off. [ID:nL5E7KS3XA].
In afternoon trading in New York, the Dow Jones industrial average <.DJI> was down 66.07 points, or 0.59 percent, at 11,124.62. The S&P 500 <.INX> was down 11.75 points, or 1.00 percent, at 1,163.63. The Nasdaq Composite <.IXIC> was down 23.58 points, or 0.93 percent, at 2,523.25.
Traders also cited the month-end and quarter-end as a reason for volatility in various markets.
Benchmark U.S. Treasury yields held slightly above 2
percent after a $35 billion sale of five-year notes. U.S.
10-year Treasury
The euro was down 0.1 percent at $1.3574