By Chuck Mikolajczak
NEW YORK (Reuters) - Fears about China's economy and falling oil prices kept world equity indexes under pressure on Wednesday, while the dollar lost ground after minutes from the U.S. Federal Reserve's July meeting left uncertainty over the timing of an interest rate hike.
In a choppy day on Wall Street, major U.S. stock indexes briefly erased their losses and the dollar weakened further after minutes from the Fed's July meeting showed concern from policymakers about lagging inflation and the weak world economy.
The minutes also showed some specific concern about the slower growth in China, which led some investors to question the likelihood of a rate hike in September, in what would be the first increase in nearly a decade.
"It was notable that they did mention China, because typically Fed minutes address U.S. economic conditions and don't normally veer off into economic conditions in other countries," said Margaret Patel, senior portfolio manager at Wells Capital Management in Boston.
"It just shows that they are extremely sensitive to the signs of weakness in global growth, and without the backdrop of inflation near the 2-percent target, it will be hard to justify, just on the basis of low unemployment, raising rates."
Energy shares <.SPNY> were the biggest drag on Wall Street, tumbling 2.8 percent, as U.S. oil prices tumbled toward $40 a barrel on a surprise jump in crude stockpiles.
In another volatile day in Asia, Chinese shares were able to rebound from a sharp drop to end the session higher, Vietnam's benchmark VN Index <.VNI> lost 0.4 percent after the central bank devalued its currency and Japan's Nikkei index <.N225> suffered its biggest fall in more than five weeks.
Economic data earlier in the day showed U.S. consumer prices rose slightly in July and suggested inflation pressures were stabilizing enough to support a rate hike this year.
European shares closed lower to extend a recent losing streak over concerns about China's growth and the U.S. inflation data.
The Dow Jones industrial average <.DJI> fell 162.61 points, or 0.93 percent, to 17,348.73, the S&P 500 <.SPX> lost 17.31 points, or 0.83 percent, to 2,079.61 and the Nasdaq Composite <.IXIC> dropped 40.30 points, or 0.8 percent, to 5,019.05.
The pan-European FTSEurofirst index of 300 leading shares <.FTEU3> was 1.9 percent lower. MSCI's all-country world stock index <.MIWD00000PUS> declined 0.9 percent.
The dollar <.DXY> was down 0.7 percent at 96.38 against a basket of major currencies after hitting a low of 96.359.
The Shanghai and Shenzhen markets <.SSEC><.CSI300> fell more than 5 percent early on, but both rallied to finish up more than 1.2 percent as the central bank injected more funds into the financial system for a second day.
MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> shed 0.3 percent while its main index of emerging market shares <.MSCIEF> fell 0.8 percent.
U.S. crude
(Additional reporting by Sam Forgione; Editing by Nick Zieminski)
