Adds quote in paragraph 7, updates prices throughout

By Nell Mackenzie and Wayne Cole

LONDON/SYDNEY, Aug 19 (Reuters) -World stocks edged up and the dollar slid on Monday after global equities enjoyed their best week in nine months on 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 saw gold hover near historic highs and the dollar dip against the euro, while the yen made a sudden lunge higher that weighed on the Nikkei.

MSCI's broadest index of world stocks had edged up around 0.2% .MIWD00000PUS at 0900 BST. 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 firmed 0.4%.

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.

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 opened flat on Monday while the blue-chip FTSE 100 index .FTSE fell 0.3% and Germany's .DAXI ticked down 0.2% as of 0855 BST.

Aerospace and defence stocks .FTNMX502010 inched 1.3%lower, tracking losses in European defence stocks following reports the German federal government would reject new military aid requests for Ukraine due to spending cuts.

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

U.S. futures remained flat..N

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 146.12 yen JPY=EBS while the euro firmed to $1.1040 EUR=EBS, just below last week's peak of $1.1047. USD/

"The overall Fed message this week is likely to reassure market participants looking for confirmation that policy rate cuts are now imminent," said Jonas Goltermann, deputy chief markets economist at Capital Economics.

"As such, the greenback may well remain under pressure in the near term, although given the extent to which Fed easing is already discounted, we doubt there is that much further dollar weakness in store."

A softer dollar combined with lower bond yields helped gold hold around $2,503 an ounce XAU=, and near an 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 60 cents to $79.08 a barrel, while U.S. crude CLc1 lost 70 cents to $75.95 per barrel.

Reporting by Nell Mackenzie, Wayne Cole; Editing by Dhara Ranasinghe, Christopher Cushing and Giles Elgood

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