* European, Asia stock markets drop for second straight day
* Dollar index wallows close to 3 1/2-week lows
* Crude oil, commodities come back under pressure
* Brazilian markets hammered but political woes
By Marc Jones
LONDON, Oct 14 (Reuters) - World shares fell for a second
day running and the dollar dropped to its lowest in almost a
month on Wednesday following new signs of a slowdown in China's
economy.
Limp inflation figures from China, volatility in other major
emerging markets and more falls in commodities dampened buying.
MSCI's 45-country All World stock index .WORLD was down
0.4 percent at 400.24 points after a near 2 percent drop by
Japan's Nikkei had lead Asia lower and as the pan European
FTSEurofirst 300 .FTEUS opened roughly 1 percent in the red.
.EU .T
The dollar .DXY fell to its lowest in almost a month
against other main currencies on bets the uncertainty will
prevent a rise in U.S. interest rates, oil slipped again while
safe-haven gold XAU= notched a fourth day of gains.
In Europe, eyes were on Portugal after talks to form a new
government had broken down in Lisbon on Tuesday.
Caretaker prime minister Pedro Passos Coelho, whose
centre-right grouping won the Oct. 4 election but lost its
parliamentary majority, failed to obtain backing from Socialist
Party leader Antonio Costa.
Portugal's bond yields rose, defying a broader debt market
rally and though Lisbon stocks .PSI20 were up slightly on day
they have shed over 5 percent so far this week and some bank
stocks are down as much as 16 percent BCP.LS .
COUP MONGERING
Brent oil LCOc1 retreated towards $49 a barrel as the
International Energy Agency has indicated the oil glut will
persist through next year. Industrial metals prices were all
lower.
Fragile politics are adding to emerging market risks.
Brazil's real BRL= dropped about 2 percent overnight as
President Dilma Rousseff accused her opponents of 'deliberate
coup-mongering' as tensions rose over a federal audit of how
deficit numbers were published.
The focus was still mostly on China though and what kind of
reaction there will be from authorities there to clearly slowing
growth. The country's authorities are due to announce a new
five-year economic plan later this month.
China's consumer price index (CPI) rose 1.6 percent in
September from a year earlier, the National Bureau of
Statistics(NBS) said, falling short of expectations of 1.8
percent and down from August's 2.0 percent.
Earlier in the day, the Monetary Authority of Singapore
(MAS) had said that it will ease its monetary policy for the
second time this year by slowing the pace of the Singapore
dollar's appreciation. The move was aimed at reviving an economy
that narrowly avoided a recession in the third quarter.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS ended down 0.6 percent, while Japan's Nikkei
stock index .N225 slumped 1.9 percent.
Chinese shares were also lower, but only just. The blue-chip
CSI300 index .CSI300 down 0.9 percent and the Shanghai
Composite Index .SSEC losing 0.8 percent.
Australian shares .AXJO also nudged lower, reflecting
China's importance as Australia's main trading partner. It also
came after Wall Street had dropped off a seven-week high SPX .
The U.S. central bank will hold just two more policy
meetings in 2015, on Oct. 27-28 and Dec. 15-16, with
expectations fading that the Fed will deliver a hike this year.
The yield on benchmark 10-year Treasuries US10YT=RR
slipped to 2.042 percent in early European trading while Wall
Street futures were pointing to a steady restart. ESc1
The dollar index .DXY , which tracks the greenback against
a basket of six peers, was down about 0.2 percent as the euro
clawed itself back above $1.1411 EUR= .