* Markets see chance of U.S. rate hike receding
* Dollar sinks to 7-wk low, bond yields fall
* European stocks break 4-day losing streak
* Retail sales data sends British pound to 2-wk high
By John Geddie
LONDON, Aug 18 (Reuters) - World stocks rose and the dollar sank to a seven-week low on Thursday after minutes of the U.S. Federal Reserve's latest meeting showed policymakers were divided over whether to raise interest rates soon.
Recent comments from Fed officials suggested a hike in the world's largest economy could be on the cards as soon as next month, but signs of restraint within the rate-setting committee brought relief to markets, sending global bond yields lower. news is good news," said Subadra Rajappa, head of U.S. rates strategy at Societe Generale (PA:SOGN).
"With little clarity on the timing of the next rate hike in the minutes of the July meeting, bonds rallied, the dollar fell and risky asset recovered."
The pan-European STOXX 600 index .STOXX , which had fallen in the last four sessions on a run of weak company earnings reports, was up 0.6 percent.
Wall Street was set to open flat SPc1 , consolidating gains seen on Wednesday.
MSCI's 46-country All World index .MIWD00000PUS climbed 0.2 percent to head back towards a one-year high, hauled higher by a 0.5 percent rise in Asian shares, their biggest rise since Aug. 8. .MIAPJ0000PUS
Japan's Nikkei .N225 bucked the trend though, dropping 1.5 percent after data showed exports from the country falling at their fastest pace since the financial crisis. 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
The fall in the dollar dominated currency market moves.
The dollar's index against a basket of six major currencies .DXY fell to 94.385, its weakest since June 24, when the global economy's outlook took a hit in the immediate aftermath of Britain's shock vote to leave the EU.
The euro was 0.3 percent higher at $1.1320 EUR= , having hit a seven-week high of $1.13285.
Even the struggling British pound rose, jumping to a two-week high of $1.3150 GBP=D4 after UK retail sales for July beat forecasts, showing little sign that British shoppers had been affected by the Brexit vote. GBP/
"The condition of the (UK) economy in the weeks since the referendum has not been as bad as feared," said Jane Foley, a currency strategist with Rabobank in London.
Global bond yields fell with Europe's benchmark, 10-year German yields, down 3 basis points at minus 0.08 percent DE10YT=TWEB and U.S. equivalents extending the previous day's drop to hit 1.55 percent US10YT=RR .
U.S. money market futures showed traders reducing bets on the timing of rate hikes. CME Group's FedWatch tool implied traders saw a 47 percent chance of a rate rise at its December meeting, down from 58 percent shortly before the release of the minutes. July meeting's minutes published on Wednesday showed Fed policymakers were generally upbeat about the U.S. economic outlook and labour market. But they also said they wanted to "leave their policy options open" as any slowdown in hiring would argue against near-term monetary tightening. weaker dollar was an additional help to commodities, but crude prices were slightly depressed by the prospect of record Saudi output. Brent crude oil futures LCOc1 were down 0.2 percent at $49.74 per barrel at 1020 GMT.
Copper, which had slid on the dollar's rise earlier in the week, trimmed some of its losses as the U.S. currency flagged.
Benchmark copper on the London Metal Exchange CMCU3 extended gains to 1.4 percent on the day at $4,838 a tonne after losing 0.8 percent on Wednesday. Gold XAU= and silver XAG= prices were also slightly higher on Thursday.