GLOBAL MARKETS-Unease over Fed leaves shares at 1-month low, bonds settle
* European shares fall after Asia drops for 4th session
* Wednesday's Fed minutes could clarify policy outlook
* Dollar supported as U.S. bond yields dip from 2-year highs
By Marc Jones
LONDON, Aug 20 (Reuters) - World shares sank to their lowest level in more than a month on Tuesday as unease about an expected cut in U.S. stimulus and a related rise in bond yields left markets on edge.
Europe's main stock markets opened down 1 percent following a fourth straight day of falls on both Wall Street and in Asia to leave MSCI's global index, which tracks shares in 45 countries, at its lowest level since July 12.
Wednesday's minutes from the most recent Fed meeting could offer fresh hints on when the U.S. central bank will start winding down its $85 billion-a-month support programme, a tricky process markets have been nervous about for months.
The uncertainty has broadly driven up bond market borrowing costs in recent weeks. The upward pressure on U.S. government bonds eased overnight, leaving the benchmark 10-year Treasury just off a 2-year high at 2.83 percent.
As has been the recent pattern, German government bonds, Europe's equivalent benchmark, moved in lockstep with yields edging down to 1.879 percent having topped 1.9 percent on Monday.
On European share markets, a 10.8 percent jump to 19.38 points in the Euro STOXX 50 Volatility Index indicated uncertainty over the near-term outlook, though the measure remained below its 2013 peak of 26.80 points.
Ramin Nakisa, a global macro strategist for UBS in London, said market turbulence was bound to pick up as the Fed starts to switch the direction of its policy.
"We expect volatility... People will start to wonder whether there is anything in the fixed-income world that really is safe," he said adding that there was also likely to be another short selloff in share markets.
The jitters about the U.S. moves continued to batter emerging markets where there are fears an end to cheap money and improvement outlooks in advanced economies could see a stampede of investment leaving already-strained markets.
Indonesia and India had another torrid session with their stock markets down 4 and 1 percent respectively as their currencies also continued to tumble.
Japan's Nikkei slumped too, falling 2.7 percent, reflecting the exposure of many Japanese companies to India and Indonesia.
"India's problems are nowhere near resolution because New Delhi has not done anything - there is no focus on improving productivity, infrastructure or getting FDI (foreign direct investment) back," said Nomura credit analyst Pradeep Mohinani in Hong Kong.
"It's all about stemming the flow of currency and that is not the cause of the problem."
Despite the focus on the Fed, the dollar was steady against a basket of major currencies. There was also little movement in the euro and sterling.
Emerging market volatility did spur the yen however. "The yen tends to attract buying when tensions in the market increase," said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.
In commodities, copper prices dropped to $7,264.75 per tonne, while gold eased to $1,361.66 per ounce after snapping a three-day winning streak on Monday and moving away from a two-month high hit that session.
Brent crude prices fell 0.5 percent to $109.36 a barrel, pressured by the Fed speculation but supported by the loss of Libya's oil exports as well as concerns that continuing unrest in Egypt could spread and interfere with supply.
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