GLOBAL MARKETS-Stocks edge up, yields dip on muted Fed hike expectations

* Beige Book shows little sign of U.S (Other OTC: UBGXF - news) . wage pressure

* U.S. Treasury yields fall for second straight day

* Fed's Lacker, George hint at U.S. rate hike (Updates with oil settlement prices, U.S. market close)

By Chuck Mikolajczak

NEW YORK, Sept 7 (Reuters) - A gauge of global equity markets reached its highest level in over a year on Wednesday and U.S. Treasury yields declined for a second straight session as expectations for a interest rate hike by the Federal Reserve remained muted.

According to the Fed's Beige Book report of anecdotal information collected from business contacts, the U.S. economy expanded modestly in July and August. But there was little sign that wage pressures were being felt beyond highly-skilled jobs, which the Fed is looking for to push inflation higher.

But comments from Richmond Fed President Jeffrey Lacker and Kansas City Federal Reserve President Esther George on Wednesday hinted that the possibility of a rate increase in September remained on the table.

The probability for a September rate hike inched up to 18 percent after the comments, from 15 percent in the prior session, according to CME's FedWatch tool, while expectations for a December increase nudged back above 50 percent.

A weaker-than-expected August employment report on Friday and Tuesday's soft services sector data have crimped expectations the Fed will boost rates when it meets next week and for the rest of the year.

"Follow-through from last week's OK-but-not-tremendous employment number is sending the lower-for-longer interest rate message out there to people ," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

The Dow Jones industrial average fell 12.4 points, or 0.07 percent, to 18,525.72, the S&P 500 lost 0.34 points, or 0.02 percent, to 2,186.14 and the Nasdaq Composite added 8.02 points, or 0.15 percent, to 5,283.93.

U.S. stocks were led lower by the consumer staples sector , off 0.9 percent. General Mills (NYSE: GIS - news) shares lost 4.3 percent to $67.85 after the company said its first-quarter organic net sales will be below its full-year guidance range.

European shares reversed early losses, with the FTSEurofirst 300 closing up 0.3 percent. MSCI (Frankfurt: 3HM.F - news) 's all-country world index edged up 0.09 percent after touching an intraday peak of 424.71, its highest level since August 2015.

Oil prices were positive in a volatile session, as the market focused on the possibility that the world's top crude producers would agree on an output freeze. Brent futures settled up 1.5 percent at $47.98 and U.S. crude ended up 1.5 percent at $45.50 a barrel.

The subdued expectations for a rate hike sent U.S. Treasury yields lower, with benchmark 10-year Treasury notes up 2/32 in price to yield 1.5374 percent, from 1.543 percent on Tuesday. Yields fell as low as 1.519 percent, a three-week trough.

The dollar was last down 0.2 percent at 101.75 yen, having fallen as low as 101.18, its weakest since Aug. 26, after a report from the Sankei newspaper that Bank of Japan policymakers are divided ahead of the central bank's next meeting.

But the dollar index, which measures the greenback against a basket of major currencies, edged up 0.18 percent to 94.994 after a drop of more than 1 percent on Tuesday.

(Additonal reporting by Caroline Valetkevitch; Editing by Nick Zieminski and Meredith Mazzilli)