* Europe shares head for worst month in four years
* China worries, Fed outlook spook investors
* Wall Street set to open lower
* Dollar loses ground against euro, yen
* Oil drops, heading for fourth straight monthly fall
By Nigel Stephenson
LONDON, Aug 31 (Reuters) - Stocks in Europe fell on Monday,
heading for their worst monthly losses in four years amid
persistent investor concerns about slowing growth in China and
the prospect of higher U.S. interest rates.
Falling share prices in Europe and Asia put pressure on the
dollar, though weekend comments from U.S. Federal Reserve
policymakers leaving the door open to a rate rise as soon as
next month kept it well above last week's seven-month lows.
U.S. stocks were expected to open lower, stock index futures
showed SPc1 ESc1 .
Oil prices fell again both on the Fed rates outlook and as
investors took profits on last week's 10 percent rise.
Just last week, after a sharp fall in Chinese shares sent
global stocks tumbling, a rise in U.S. rates for the first time
since 2006 next month had seemed off the table.
However, senior Fed official Stanley Fischer said in a
speech at the annual Jackson Hole symposium that U.S. inflation
was likely to rebound, allowing rates to rise gradually.
ID:nL1N1140FO
The pan-European FTSEurofirst 300 stocks index .FTEU3 fell
0.2 percent on Monday and, even though it has recouped all of
last week's losses, was on track for its worst monthly
performance since August 2011. Germany's DAX .GDAXI was down
0.6 percent and France's CAC 40 down 0.8 percent, both also
heading for their biggest monthly loss in four years.
FED UNCERTAINTY
"The market turmoil will continue in the near future. China
is the catalyst, but the real reason for the sell-off is the
nervousness about the first U.S. rate hike," KBC senior
economist, Koen De Leus, said.
Markets in Britain were closed for a holiday.
Asian shares closed lower. MSCI's main index of Asia-Pacific
shares excluding Japan .MIAPJ0000PUS was down 0.5 percent and
headed for its biggest monthly losses in three years. Tokyo's
Nikkei 225 index .N225 closed 1.3 percent lower, hit by weak
Japanese industrial output data.
Chinese shares had another volatile session. The CSI300
index .CSI300 ended up 0.7 percent, after falling 4 percent at
one point. The index was still down 11.8 percent for August. The
Shanghai Composite .SSEC lost 0.8 percent on the day and 12.5
percent for the month.
The dollar lost ground against both the euro and the yen as
investors trimmed bets against low-yielding currencies used to
invest in higher-yielding assets in so-called carry trades.
"Stocks markets are in focus and absence of risk appetite is
acting as a headwind to the dollar," said Niels Christensen, FX
strategist at Nordea. "Having said that, with a September rate
hike back in focus, I am biased towards more downside in the
euro against the dollar."
The dollar index, which measures it against a basket of
currencies, was down 0.1 percent .DXY on the day and 1.4
percent for August. The euro EUR= was up 0.3 percent at
$1.1206 and the yen JPY= up 0.4 percent at 121.34 to the
dollar.
The uncertainty about when the Fed might raise rates kept
yields on German government bonds, the euro zone benchmark,
close to last week's highs. Ten-year yields DE10YT=TWEB were
marginally higher at 0.74 percent.
Brent crude fell on worries over China and a global supply
glut and as investors took profits after oil's biggest two-day
rally for six years last week. Brent LCOc1 was down $1.07 a
barrel at $48.98 and, despite last week's gains, heading for its
fourth consecutive monthly decline.
Gold struggled over the Fed outlook, trading around
$1,131.80 XAU= an ounce.
"What is really significant is the upcoming U.S. nonfarm
payroll data (on Friday)," Naeem Aslam, chief market analyst at
Ava Trade, said. "If we see the average hourly income and labour
market strengthening further, this will trigger a sell-off for
gold."