* Uncertainty over Fed sends dollar, stocks lower * Japanese corporate tax signal weighs on dollar/yen * Brent crude near $111 a barrel on unrest in Egypt * Growth in Britain lifts sterling By Richard Hubbard LONDON, Aug 15 World shares edged lower and the dollar softened on Thursday as uncertainty over when U.S. Federal Reserve will begin cutting its monetary stimulus offset a brighter economic picture in Europe. A barrage of data on the health of the U.S. labour market, manufacturing and consumer price inflation due later could clarify the outlook though share index futures pointed to further falls for Wall Street ahead. "If we get good data... then it might boost thinking that tapering is coming in sooner rather than later," said Chris Beauchamp, equity analyst at IG Index. Financial markets have largely positioned for the Fed to start paring its monthly $85 billion spending on bonds in September but conflicting signals from policymakers and muted inflation data lately have undermined this conviction. On Wednesday, St. Louis Fed President James Bullard cited the inflation outlook when he said he hadn't decided whether next month's policy meeting would be too soon to curb the asset purchases, known as quantitative easing or QE. "Markets were absolutely convinced we would see about a 20 percent reduction in the run rate of QE in the September meeting," said Mike Ingram, market commentator at BGC. In response to Bullard's comments and the weak reading for U.S. producer price inflation, the dollar at one point on Thursday tumbled about 0.5 percent against the Japanese currency to a low of 97.63 yen. It later settled at around 98 yen, to be just 0.1 percent lower. The greenback's fall was exacerbated by Japanese government efforts to stamp out talk of corporate tax cuts which might have helped boost the world's No. 3 economy. Against a basket of major currencies, the dollar was down 0.2 percent, although was off its lows of last week. Talk about the timing of an end to the Fed's bond buying has dominated the markets because it is likely to boost U.S. Treasury yields, supporting demand for the dollar, and could hurt shares and commodities, which have gained as world central banks have primed markets with liquidity. The MSCI world equity index was down 0.2 percent and on course for its worst week in nearly two months after the Bullard comments sparked a selloff in the Dow on Wednesday and led to weakness across Asia. GROWTH GAINS Signs of recovery in Europe and strengthening growth in Britain still underpin the region's equity markets although investors are becoming increasingly wary over the implications for future central bank policy. German government bond yields hovered around 2013 highs on Thursday after money market rates moved higher following data that showed the euro zone economy had emerged from an 18-month-long recession in the second quarter. With much of Europe closed for public holidays, 10-year German yields were holding at 1.87 percent, the highest since April 2012. British government bond prices fell sharply and the pound hit a two-month high against the dollar as strong retail sales added to a string of recent data that have pointed to an economic recovery gathering steam. Sterling rose to $1.5590 after the data while September gilt futures extended their losses sharply to be down 0.6 percent at 109.25. Britain's main share index, the FTSE 100 slipped by over 1.1 percent. In commodity markets, supply worries linked to the growing violence in Egypt and the brighter global growth outlook pushed oil prices higher and kept copper near a nine-week high. A state of emergency was declared by the Egyptian government on Wednesday following deadly political violence. Investors fear the turmoil could choke off routes such as the Suez Canal or spill over into big oil-producing nations. "Egypt may not be a major oil producer but the Suez Canal is an important gateway, not just for oil flows but also for commodities," said Carl Larry, president of Houston-based consultancy Oil Outlook and Opinions. "If there is any disruption or if the violence results in the shutting down of the canal, the impact will be quite severe." Brent crude was trading 70 cents higher at $110.90 after jumping by over a dollar earlier to $111.53, its highest level since April 2. U.S. oil rose 83 cents to $107.68. Copper was little changed $7,264 a tonne, while gold stood near a 3-week high at $1,338.25 an ounce.