* Fed minutes cool hopes for Sept rate liftoff
* German stocks face worst month since 2012
* Wall St on pace for third straight decline
(Adds U.S. market open, changes byline, dateline, previous
LONDON)
By Chuck Mikolajczak
NEW YORK, Aug 20 (Reuters) - World stock markets and oil
prices fell on Thursday as another slump in the equity market of
China, the No. 2 economy, stoked concerns about sluggish global
growth.
Wall Street was also weighed down by a drop in finance
stocks and was poised for a third day of declines as
expectations cooled for a U.S. interest rate hike in September.
Stocks in China tumbled again, with both the Shanghai and
Shenzhen markets .SSEC .CSI300 down more than 3 percent.
ID:nL3N10V2PQ Investors have been concerned a weak currency
and slowing economy may spur further capital outflows.
"This is clearly the indicators that are coming out of
China," said Paul Mendelsohn, chief investment strategist at
Windham Financial Services in Charlotte, Vermont.
"There is tremendous risk in this market right now; in
addition, you haven't had a more than 5 percent correction (in
U.S. stocks) in years, so we are so overdue for a correction."
Shares in Asia hit a two-year low, German stocks extended
losses in what is shaping up to be their worst month in over
three years, and British stocks hit their lowest since January.
Financials .SPSY were the worst performing of the 10 major
S&P sectors, down 1.5 percent. The drop comes in the wake of
minutes released Wednesday from the Federal Reserve's July
meeting, which cast doubt that the Fed would start to raise
interest rates as early as September, the first such move in
nearly a decade.
The Dow Jones industrial average .DJI fell 191.01 points,
or 1.1 percent, to 17,157.72, the S&P 500 .SPX lost 21.2
points, or 1.02 percent, to 2,058.41 and the Nasdaq Composite
.IXIC dropped 76.44 points, or 1.52 percent, to 4,942.61.
MSCI's all-country world stock index .MIWD00000PUS lost 1
percent after touching a 6-month low.
The Fed minutes showed officials in broad agreement that the
U.S. economy was nearing the point where interest rates should
move higher. But they also noted that lagging inflation and a
weak global economy posed too big a risk to commit to a rate
"lift off." ID:nL1N10U1HJ
"In this kind of environment, if this market is going to
drop and China is going to drop, how are they going to raise
interest rates here?" Mendelsohn said.
BROAD DECLINES
The FTSEuroFirst index of 300 leading European shares fell
1.9 percent .FTEU3 and Germany's DAX fell 2.1 percent .GDAXI
to its lowest since January. That put the DAX down about 7.5
percent so far this month, its worst month in three years.
ID:nL5N10V2DN
In Asia, MSCI's broadest index of Asia-Pacific shares
outside Japan .MIAPJ0000PUS shed 1.7 percent to a two-year
low, marking a fifth consecutive day of losses in what is its
longest losing streak this year.
Japan's Nikkei .N225 fell 0.9 percent.
Benchmark 10-year notes US10YT=RR were last up 9/32 in
price to yield 2.0976 percent from 2.50 percent in mid-June.
The dollar .DXY shed 0.34 percent to 96.028 against a
basket of major currencies amid the diminished rate hike
expectations, touching a 1-month low of 95.859.
Commodities and emerging markets were among the hardest-hit
by fear of slowing Chinese demand, and were exacerbated by the
Fed minutes. ID:nL1N10V0TH
U.S. crude oil CLc1 bounced from a 6-1/2 year low of
$40.21 to trade up 0.4 percent at $40.97, while Brent crude was
down 0.4 percent at $46.99. ID:nL5N10V2L1
MSCI's emerging market index .MSCIEF set a near four-year
low, having fallen 22 percent from this year's high hit in
April.
(Editing by Bernadette Baum)