* European shares open lower, world stocks off 1-year high
* Dollar hits one-month low against Japanese yen
* U.S. CPI, industrial output data out later in the day
* Oil prices remain near five-week highs
By Dhara Ranasinghe
LONDON, Aug 16 (Reuters) - World stocks markets edged away from one-year peaks on Tuesday as a stellar rally stalled, while the dollar hit a one-month low against the yen as recent weak U.S. economic data was seen limiting the scope for a near-term rate hike.
Asian shares rose to a one-year peak, lifted by a rise in U.S. stocks to record highs a day earlier and expectations that monetary policy around the world will remain lower for longer than anticipated to support growth.
Monetary easing by central banks and a rebound in oil prices have bolstered world stocks, with markets in the U.S., Europe and Asia outside Japan up roughly 10 percent since late June.
But, in a sign that the rally in world shares was losing momentum, Chinese stocks pulled back from seven-month highs following a sharp correction in bank shares .CSI300 .SSEC and Japan's Nikkei .N225 fell more than 1.5 percent to its lowest level in just over a week as the yen firmed.
European shares opened broadly lower, edging away from Monday's seven-week highs as markets in London, Paris and Frankfurt slipped 0.4-0.9 percent in early trade.
The MSCI world equity index .MIWD00000PUS was off Monday's one-year high, while U.S. stock futures traded lower.
"Equity markets are looking a bit frothy and what's dragging them down is a bit of softness in the oil price and yen strength," said Michael Hewson, chief market analyst at CMC Markets. "Investors are a bit nervous but ultimately in a low-yield world, stocks remain a decent bet for yield."
The dollar fell to a one-month low against Japan's yen as recent weak U.S. economic data was seen limiting the prospects for a near-term interest-rate rise.
A trigger for its weakness overnight was a paper from San Francisco Fed President John Williams arguing that central banks might have to raise inflation targets, focus more on growth and back much looser fiscal policy in future. dollar traded as low as 100.15 yen, its lowest since the aftermath of Britain's vote in June to leave the European Union. It weakened to a 7-week low of $1.1258 per euro EUR= , and by 0.5 and 0.7 percent respectively against the Australian AUD= and New Zealand dollars NZD= .
FED WATCH
Inflation, housing starts and industrial output data later in the day could provide more clues on the outlook for U.S. interest rates.
The minutes from the Federal Reserve's July policy meeting, due on Wednesday, are also in focus.
Although Fed officials have said a rate hike is possible by the end of year, investors are not convinced the Fed can raise rates this year given the fragile global economic outlook.
Most other countries are easing monetary policy, with Britain, Australia and New Zealand cutting rates in recent weeks and Japan stepping up its purchases of exchange-traded funds.
These measures pose a risk that any Fed tightening could strengthen the dollar to an uncomfortable level for U.S. companies and policymakers.
Fed funds futures are pricing in only a 50 percent chance of one rate hike by December.
For Reuters new Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
Oil prices remained near five-week highs, fuelled by talk of producers taking action to prop up the market, although some investors cashed in during Asian hours on the 16 percent rally since early August.
The market started to rally on Thursday after Saudi Arabia's energy minister said non-members and members of the Organization of the Petroleum Exporting Countries (OPEC) are to meet on the sidelines of the International Energy Forum, which groups producers and consumers, in Algeria next month.
Brent crude futures LCOc1 were trading at $48.35 per barrel at 0737 GMT, flat from their last close, but over 15 percent higher than the $41.51 low for the month on Aug. 2.
U.S. West Texas Intermediate crude CLc1 was trading at $45.76 a barrel, up 2 cents from its previous close, and still more than 16 percent above its $39.19 monthly low from Aug. 3.
"I don't think we will hit new lows in oil until the OPEC meeting is out of the way," said Ipek Ozkardeskaya, a market strategist at London Capital Group.