GLOBAL MARKETS-Fed signal, financial results aid stocks

* MSCI world equity index up 0.3 percent at 344.01

* Fed signals, financial sector results aid shares

* Dollar hits 7-month high vs yen

By Natsuko Waki

LONDON, Aug 6 (Reuters) - World stocks edged higher on Wednesday after the Federal Reserve signalled it was in no rush to raise interest rates, while encouraging results from the financial sector and oil prices below $120 a barrel also helped.

The U.S. central bank left rates steady as expected at 2.0 percent on Tuesday, expressing concerns about both economic growth and inflation. This soothed investors who feared that rising price pressures would prompt it to raise the cost of borrowing in the near future. Oil prices dropped further to a fresh three-month low below $119 a barrel before recovering slightly. The dollar rose to seven-month highs versus the yen as falling oil prices eased concerns about the burden on corporates and consumers. Investors also cheered results from the financial sector. BNP Paribas (BNPP.PA) and Commerzbank (CBKG.DE) reported above-forecast results, while U.S. bond insurer Ambac (ABK.N)'s second-quarter earnings jumped, helped by valuation gains on credit derivatives.

"Investor angst has turned to optimism quickly, and there's a feeling that things will be okay and we can move on," said Heinz-Gerd Sonnenschein, strategist at Postbank in Bonn.

The FTSEurofirst 300 index .FTEU3 rose 0.2 percent while the MSCI main world equity index .MIWD00000PUS rose a third of a percent, coming off Tuesday's three-week lows.

Stocks trimmed gains after U.S. mortgage lender Freddie Mac (FRE.N) reported worse-than-expected results and posted its fourth consecutive quarterly loss.

U.S. stock futures SPc1 were down 0.2 percent, pointing to a weaker open on Wall Street later.

DOLLAR GAINS

The dollar rose as high as 108.70 yen JPY= as falling oil prices overwhelmed disappointment that the Fed may not deliver a yield-boosting interest rate hike soon. Firmer risk appetite also dented the low-yielding yen, widely used to buy higher-yielding assets in carry trades.

"There's been a tentative return to open carry trades and the rally in stock markets has helped that," said Adam Cole, global head of FX strategy at RBC Capital Markets. "That has helped drive yen short positions."

The dollar was steady against a basket of major currencies .DXY.

According to interest rate futures contracts, investors expect the Fed to start raising interest rate only in January.

A Reuters poll of 17 primary dealers, banks who deal directly with the Fed, found them unanimously predicting that no interest rate changes would occur in the next two meetings, in September and October. [FED/R]

Emerging sovereign spreads 11EMJ tightened 1 basis point while emerging stocks .MSCIEF rose 1 percent.

Howver, government bonds in Japan and the euro zone rose too, reflecting concerns over the slowing economy.

The September Bund future FGBLU8 rose 30 ticks while Japanese government bond futures 2JGBv1 rose to four-month highs.

U.S. light crude CLc1 stood at $119.45 a barrel after falling as low as $118.10, hit by concerns over weakening demand. Gold XAU= was slightly higher at $884.50 after hitting its lowest level in seven weeks.

This week's fall in oil and commodities come after broader commodity prices .CRB posted their biggest monthly loss in at least 10 years in July. (Additional reporting by Sitaraman Shankar and Alastair Sharp; Editing by Ruth Pitchford)