* MSCI world equity index modestly lower
* Dollar slips as Jackson Hole meeting gets underway
* U.S. factory sector contracts for first time in a decade -IHS Markit (Updates to close of European trading)
By Saqib Iqbal Ahmed
NEW YORK, Aug 22 (Reuters) - An index of stock markets worldwide edged lower on Thursday on uncertainty over the outlook for U.S. interest rate cuts and weak U.S. manufacturing data that raised concerns about the health of the world's largest economy.
U.S. manufacturing industries recorded their first month of contraction in almost a decade amid concerns about whether the U.S.-China trade conflict would tip the economy into a recession, a private survey showed.
"Manufacturing has been pretty weak across the globe for a while now and we are starting to see that bleed into the U.S.," said Joe Mallen, chief investment officer at Helios Quantitative Research.
Investors' focus, however, remained firmly on Friday's speech by Federal Reserve Chair Jerome Powell at a Jackson Hole, Wyoming, event, which could offer clarity on the direction of U.S. monetary policy.
The Fed has come under increasing pressure to cut borrowing costs more, including a call by President Donald Trump on Wednesday for the central bank to reduce its benchmark rate.
The MSCI world equity index, which tracks shares in 47 countries, was down 0.2%.
On Wall Street, stocks were little-changed in a choppy session. While strong results from retailers bolstered confidence in consumer demand and lifted shares, the manufacturing data and comments from Fed officials dampening hopes of future interest rate cuts hurt risk sentiment.
The Dow Jones Industrial Average was the strongest of the three U.S. major stock indexes, helped by a 4.52% jump in Boeing's shares after a Reuters report that the company has told suppliers it will resume production of its best-selling 737 jets at a rate of 52 aircraft per month in February 2020.
The Dow rose 69.51 points, or 0.27%, to 26,272.24, the S&P 500 gained 0.2 points, or 0.01%, to 2,924.63 and the Nasdaq Composite dropped 23.91 points, or 0.31%, to 7,996.30.
European shares, which found support from upbeat surveys on Germany and the euro zone, declined on a report that the Bundesbank sees no need for German fiscal stimulus right now. The pan-European STOXX 600 index closed down 0.40%.
In currency markets, the U.S. dollar weakened as investors braced for a possible announcement or statement from the Jackson Hole meeting.
While the Fed's latest minutes showed U.S. policymakers are reluctant to begin a big rate-cutting cycle in the coming months, market participants still expect the Fed to signal a stimulus measure, or an affirmation that the U.S. central bank is on a steady path to ease interest rates, a scenario viewed as negative for the dollar.
"Jackson Hole is going to provide an opportunity for the Fed to correct that communication mistake in the minutes," said Edward Moya, senior market analyst at OANDA in New York.
The dollar slipped 0.15% against a basket of other major currencies to 98.144.
Asian currencies suffered after the Chinese yuan fell to an 11-year low against the dollar, indicating trade tension between the world's two biggest economies remained a major issue. nB9N22601Z]
Treasury yields, which climbed after better-than-expected manufacturing data in Europe boosted risk sentiment, pared gains following the U.S. manufacturing data.
Benchmark 10-year notes were down 6/32 in price to yield 1.5978%, up from 1.577% late on Wednesday.
Oil prices weakened as worries about the global economy weighed.
Brent crude fell 0.14 cents to $60.16 a barrel, while U.S. West Texas Intermediate crude fell 0.09 cents to $55.59.
Gold prices were slightly lower as investors awaited the outcome of the Jackson Hole meeting. Spot gold dropped 0.13% to $1,499.9871 an ounce.
Reporting by Saqib Iqbal Ahmed; Additional reporting by Gertrude Chavez-Dreyfuss in New York, Akanksha Rana and Medha Singh in Bengaluru; Editing by Dan Grebler and Steve Orlofsky