Corrects to add dropped word "in" in paragraph 9

By Lawrence Delevingne and Nell Mackenzie

Aug 19 (Reuters) -Wall Street pushed higher as the dollar tipped lower on Monday, after stocks surged last week on expectations the U.S. economy would dodge a recession and cooling inflation would kick off a cycle of interest rate cuts.

The Dow Jones Industrial Average .DJI rose 0.46% to 40,846.81, the S&P 500 .SPX gained 0.4%, to 5,576.22 and the Nasdaq Composite .IXIC gained 0.34% to 17,691.80. MSCI's broadest index of world stocks had edged up around 0.6% .MIWD00000PUS.

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.

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

Yields on U.S. government debt eased on Monday; the yield on benchmark U.S. 10-year notes US10YT=RR fell 1.7 basis points to 3.875%, from 3.892% late on Friday.

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", analysts said in anote on Friday.

Ahead of the busy week, broad European shares .STOXX moved about 0.7% higher, while the blue-chip FTSE 100 index .FTSE traded up 0.68%.

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 up 8.7% last week. Chinese blue chips .CSI300 closed about 0.3% higher.

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 0.78% to 146.46 yen JPY=EBS while the euro firmed to $1.106 EUR=EBS, around 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 not completely vanished, said Deutsche Bank macro strategist 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.

A softer dollar combined with lower bond yields could not hold gold at its zenith and it fell to around $2,503 an ounce XAU=, down from its all-time peak of $2,509. GOL/

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

U.S. crude CLc1 lost 0.33% to $76.4 a barrel and Brent LCOc1 fell to $79.43 per barrel, down 0.31% on the day.

Reporting by Lawrence Delevingne in Boston and Nell Mackenzie in London; Editing by Dhara Ranasinghe, Christopher Cushing, Ed Osmond, Giles Elgood and Alex Richardson

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