* No surprises in Fed minutes, markets reaction muted * Investors await Bernanke speech after market's close * U.S. oil surges, gains on Brent as crude inventory shrinks By Herbert Lash NEW YORK, July 10 (Reuters) - U.S. stocks, the dollar and government debt prices fell on Wednesday after minutes from a Federal Reserve meeting in June showed policymakers favored a reduction in bond buying soon, but the outlook for jobs needs to improve before that happens. U.S. stocks, government bonds and the dollar initially pared losses after the minutes form the June 18-19 meeting were released, but those markets later wracked up wider losses. The U.S. 10-year Treasury note fell 12/32 in price, the euro gained 0.84 percent and most U.S. stocks fell about 0.1 percent, though the Nasdaq was higher. Some policymakers felt that Fed Chairman Ben Bernanke, who was due to speak after the close of regular Wall Street trading, should describe the likely path for Fed asset purchases in the future. Even as consensus built within the Fed about the likely need to begin pulling back on its economic stimulus measures soon, many officials wanted more reassurance the recovery in U.S. employment was on solid ground before a policy retreat. "The market is moving away from its concerns about tapering and toward about the timing when it will normalize interest rates and who will replace Bernanke," said Robbert Van Batenburg, director of market strategy at Newedge USA LLC in New York. The Dow Jones industrial average was down 17.30 points, or 0.11 percent, at 15,283.04. The Standard & Poor's 500 Index was down 1.06 points, or 0.06 percent, at 1,651.26. The Nasdaq Composite Index was up 16.25 points, or 0.46 percent, at 3,520.52. Weak data from China and a ratings downgrade of Italy curbed investors' enthusiasm for equities before the minutes' release. After a five-day run of gains for world share markets and the dollar's surge to a three-year high, investors were booking profits and squaring positions. MSCI's world equity index was up 0.27 percent, about the same as before the minutes' release. It was helped by a late rally in Chinese shares sparked by talk of a policy easing to offset slowing growth. The broad FTSEurofirst 300 index of leading regional European companies buckled as data showing China's exports fell for the first time in 17 months was followed by soft manufacturing data from France, the Netherlands and Greece. The index ended 0.09 percent higher at 1,190.02. China warned of a "grim" outlook for trade after data showed exports fell 3.1 percent in June, confounding forecasts for a 4 percent rise. However, the data fueled talk that China's central bank may ease policy in an effort to boost growth. The euro's gains against the dollar accelerated early in New York trade and it touched a session high after the release of some weak U.S. data. U.S. wholesale inventories fell in May by the most in over a year and a half, the second straight monthly decline for the reading and a sign that restocking by businesses could weigh on growth in the second quarter. The euro rose as high as $1.2945 and last traded at 1.2887, up 0.84 percent on the day. The benchmark 10-year U.S. Treasury note was down 10/32 in price to yield 2.6759 percent. German Bund futures reversed gains, tracking weakness in U.S. Treasuries before a $21 billion auction of U.S. 10-year notes and the Fed minutes. Bund futures settled 2 ticks higher at 142.56. U.S. crude oil prices surged nearly $3 a barrel to their highest in 16 months, narrowing the discount to Brent crude to less than $2 after U.S. data showed the biggest two-week decline in crude stocks on record. Oil inventories plunged about 10 million barrels for a second week in a row, highlighting the unexpectedly rapid tightening of the market after three years of pent-up supply due to a dramatic resurgence in domestic production. U.S. crude rose $2.99 to settle at $106.52 a barrel, while Brent gained 70 cents to settle at $108.51.