Adds quote in paragraph 17, updates prices throughout

By Nell Mackenzie

LONDON, Aug 19 (Reuters) -Wall Street looked to a flat open as the dollar tipped lower on Monday off the back of last week's surging stock markets as expectations the U.S. economy would dodge a recession and cooling inflation would kick off a cycle of interest rate cuts.

The prospect of lower borrowing costs could not sustain gold's historic highs and the dollar dipped against the euro, while the yen lunged higher.

Both S&P 500 futures ESc1 and Nasdaq futures NQc1 were trading around flat at 1215 BST..N

MSCI's broadest index of world stocks had edged up around 0.2% .MIWD00000PUS.

In the U.S., Federal Reserve members Mary Daly and Austan Goolsbee were out over the weekend to flag the possibility of easing in September, while minutes of the last policy meeting due this week should underline the dovish outlook.

Fed Chair Jerome Powell speaks in Jackson Hole on Friday and investors assume he will acknowledge the case for a cut.

"Everything points to this Friday. We'll be looking for any indication that rate cuts might be on the way. The next question is, how big will those rate cuts be?" said Paul O'Neill, chief investment officer of wealth management firm Bentley Reid.

Futures 0#FF: are fully priced for a quarter-point move, and imply a 25% chance of 50 basis points with much depending on what the next payrolls report shows. FEDWATCH

Analysts at Goldman Sachs downshifted their U.S. recession expectations to a 20% chance and could push them lower if the August jobs report due in September "looks reasonably good", said a note on Friday.

Ahead of the busy week, broad European shares .STOXX ticked 0.2% higher, while the blue-chip FTSE 100 index .FTSE traded flat. France .FCHI and Germany's .DAXI climbed 0.3% and 0.2% respectively.

Investors are anticipating flash Purchasing Managers' Index (PMI) data for France, Germany, Britain and the Eurozone later this week.

Earlier, the Nikkei index .N225 closed 1.77% lower at 37,388.62, snapping a five-day winning run that pushed it up8.7% last week. Chinese blue chips .CSI300 closed about 0.3% higher.

A preliminary takeover offer from Canada's Alimentation Couche-Tard ATD.TO sent the 7-Eleven convenience store chain Seven & I holdings 3382.T surging 23% to a daily limit high, though no decision to accept the offer has been taken.

CUTS FOR ALL

The Fed is hardly alone in contemplating looser policy, with Sweden's central bank expected to cut rates this week, and possibly by an outsized 50 basis points.

In currency markets, the dollar lapsed 1.0% to 146.27 yen JPY=EBS while the euro firmed to $1.1040 EUR=EBS, just below last week's peak of $1.1034. USD/

Even as markets have calmed again, it is worth remembering that the economic fundamentals behind the global markets selloff two weeks ago have notcompletely vanished, said Deutsche Bank macrostrategist Henry Allen.

"Economic data has been increasingly soft at a global level, falling inflation means that monetary policy is increasingly tight in real terms, geopolitical concerns are elevated, and we're heading into a tough period on a seasonal basis," said Allen in a note on Monday.

A softer dollar combined with lower bond yields could nothold gold at its zenith and it fell to around $2,488 an ounce XAU=, down from its all-time peak of $2,509. GOL/

Oil prices dipped again as concerns about Chinese demand continued to weigh on sentiment. O/R

Brent LCOc1 fell about 55 cents to $79.13 a barrel, while U.S. crude CLc1 lost 59 cents to $76.06 per barrel.

Reporting by Nell Mackenzie; Editing by Dhara Ranasinghe, Christopher Cushing, Giles Elgood and Ed Osmond

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