GLOBAL MARKETS-Stocks ease on China, Fed concerns; oil rallies

* European shares end lower

* China worries, Fed outlook spook investors

* Dollar loses ground against basket of currencies

* Oil jumps, erases early losses (Updates with oil prices rallying)

By Caroline Valetkevitch

NEW YORK, Aug 31 (Reuters) - World stock indexes edged lower on Monday amid persistent investor concerns about slowing growth in China and the prospect of higher U.S (Other OTC: UBGXF - news) . interest rates, while oil prices rallied.

Oil was up more than $2 a barrel, rebounding from early losses, as data showed contracting U.S. production and OPEC willingness to talk with other producers about falling prices.

U.S. stocks eased, on track for their worst monthly drop in more than three years.

Weekend comments from Federal Reserve policymakers left the door open to a U.S. rate rise as soon as next month.

Fed Vice Chairman Stanley Fischer said in a speech at the annual Jackson Hole, Wyoming, central bankers' symposium that U.S. inflation was likely to rebound, allowing rates to rise gradually.

"We can still expect to see some significant drops in the market until we get some direction from the Fed regarding a rate increase," said John DeClue, chief investment officer of U.S. Bank Wealth Management.

The Dow Jones industrial average fell 50.18 points, or 0.30 percent, at 16,592.83. The Standard & Poor's 500 Index was down 7.45 points, or 0.37 percent, at 1,981.42. The Nasdaq Composite Index was down 11.53 points, or 0.24 percent, at 4,816.79.

The dollar eased as weaker stock markets prompted investors to trim bets against currencies popularly used to fund risky carry trades.

But Fischer's comments limited the dollar's losses. The U.S. dollar index, which measures the greenback against a basket of currencies, was down 0.1 percent.

The pan-European FTSEurofirst 300 stocks index closed down 0.2 percent. Germany's DAX fell 0.4 percent, while MSCI (NYSE: MSCI - news) 's measure of world stock markets also slipped 0.4 percent.

Chinese shares had another volatile session. The CSI300 index ended up 0.7 percent, after falling 4 percent at one point. The index was still down 11.8 percent for August.

OIL JUMPS

Oil rose further after its biggest two-day rally in six years last week.

Brent October crude was up $2.45 at $52.50 a barrel, while U.S. October crude was up $2.50 at $47.72.

U.S. domestic crude oil production peaked at just above 9.6 million barrels per day in April before falling by more than 300,000 bpd over the following two months, Energy Information Administration data showed on Monday.

U.S. safe-haven Treasuries prices rose on continued concerns over China and emerging market economies, while month-end buying gave longer-dated Treasuries prices a boost.

U.S. 30-year Treasuries were last up 2/32 in price to yield 2.91 percent. Benchmark 10-year Treasuries were last up 3/32 in price to yield 2.17 percent, from a yield of 2.18 percent late Friday. (Additional reporting by Robert Gibbons in New York, and Tanya Agrawal, Nigel Stephenson and Anirban Nag; Editing by James Dalgleish and Dan Grebler)