GLOBAL MARKETS-European shares, oil ease as markets return to Fed-watching

(Updates prices)

* European shares -1% on the week, oil at 8-wk high

* All eyes on Fed, Jackson Hole meeting next week

* Oil snaps 6-day rally on hopes of production cuts

* U.S (Other OTC: UBGXF - news) . dollar stuck near 8-wk lows vs euro

* European earnings f'casts: http://reut.rs/2553txN

By Vikram Subhedar

LONDON, Aug 19 (Reuters) - European shares were poised to post their biggest weekly loss in two months on Friday while crude oil snapped its winning streak after a weaker dollar and hopes of production cuts had lifted prices to eight-week highs.

With (Other OTC: WWTH - news) the corporate earnings season in the United States and Europe largely out of the way, the focus is back on the U.S. Federal Reserve and whether it decides to raise interest rates.

Mixed messages from the Fed in recent days have left investors cagey before next week's annual meeting of central bankers from around the world in Jackson Hole, Wyoming, at which Fed Chair Janet Yellen is likely to cement expectations for a slow pace of rate increases.

European shares fell 0.6 percent on the day and are off 1 percent for the week, their biggest weekly loss since mid-June. The index is down 6.7 percent this year, but has rebounded 11 percent from its post-Brexit vote low.

S&P 500 e-mini futures were off 0.3 percent pointing to a lower open on Wall Street. All major U.S. stock indices are still holding near record highs.

Volumes have thinned out in Europe with the summer lull kicking in. Thursday's session was the quietest in terms of trading activity across Europe's stock exchanges in nearly three months, according to Thomson Reuters (Dusseldorf: TOC.DU - news) data.

"We continue to forecast a 'fat and flat' market for equities across regions for the remainder of 2016," Goldman Sachs said in a note to clients, suggesting that while the investment bank does not forecast a big slide, catalysts for further gains remain elusive.

"There is the risk of shocks due to elevated political uncertainty in (the second half) and the potential for both monetary and fiscal stimulus disappointments," it said.

All major sectors were in the red in Europe though indexes received some support from energy sector heavyweights such as BP and Statoil (LSE: 0M2Z.L - news) which rose on the back of earlier rises in oil prices.

Brent crude fell 0.3 percent ending a six-day run of gains as weak fundamentals countered a lift in sentiment over talks next month on a possible output freeze.

In currency markets, uncertainty around Fed rate hikes has hurt the U.S. dollar which was poised for a weekly loss against its major counterparts and remained mired near eight-week lows against the euro.

"The dollar has just been trading on the back foot really," said Lee Hardman, a strategist with Bank of Tokyo-Mitsubishi (LSE: 7035.L - news) in London.

"The market is generally of the view that the Fed isn't going to raise rates any time soon. That leaves the dollar vulnerable in the near term," Hardman said.

The dollar index, which tracks the greenback against a basket of six major rivals, was down 1.4 percent for the week, though it rose 0.3 percent on Friday to 94.421. It had fallen as low as 94.077 on Thursday, its weakest since June 23.

The euro dipped 0.2 percent to $1.1324, still up 1 percent on the week while the yen traded at 100.170, slightly off an eight-week high of 99.55 yen hit on Tuesday.

(Reporting by Vikram Subhedar, Editing by Jeremy Gaunt and Adrian Croft)