GLOBAL MARKETS-Fed unease sends shares to 1-month low, emerging markets suffer
* European shares fall after Asia drops for 4th session
* Wednesday's Fed minutes could clarify policy outlook
* Dollar dips, U.S. bond yields ease from 2-year highs
* Emerging currencies stabilise after fresh battering
LONDON, Aug 20 (Reuters) - World shares sank to their lowest level in more than a month and emerging markets endured another wave of selling on Tuesday, as unease about an expected cut in U.S. stimulus and related gains in bond yields left investors on edge.
Europe's main stock markets were down almost 1 percent by mid-morning following a fourth straight day of falls on both Wall Street and in Asia as India, Indonesia and other developing markets suffered.
U.S. shares were set to open slightly lower again on Tuesday.
Wednesday's minutes from the most recent Fed meeting could offer fresh hints on when the U.S. central bank will start winding down its $85 billion-a-month support programme, a tricky process markets have been nervous about for months.
The uncertainty has broadly driven up bond market borrowing costs in recent weeks, which in turn has sparked a sell-off in the riskier assets that have soared over the last few years.
The upward squeeze on U.S. government bonds eased overnight and the benchmark 10-year Treasury continued to edge away from Monday's 2-year high in European trading, leaving it at 2.1824 percent ahead of the U.S. restart.
As has been the recent pattern, German government bonds, Europe's equivalent benchmark, moved in lockstep with yields easing to 1.861 percent having topped 1.9 percent a day earlier.
On European share markets, a 10.8 percent jump to 19.40 points in the Euro STOXX 50 Volatility Index indicated uncertainty over the near-term outlook, though the measure remained below its 2013 peak of 26.80 points.
Ramin Nakisa, a global macro strategist for UBS in London, said market turbulence was bound to pick up further as the Fed starts to switch policy direction.
"We expect volatility... People will start to wonder whether there is anything in the fixed-income world that really is safe," he said adding that there was also likely to be another short selloff in share markets.
The jitters about the future of U.S. stimulus continued to batter emerging assets, given fears that an end to cheap money and an improvement in advanced economies' prospects could see a stampede of investment leaving already-strained markets.
Indonesia and India saw their stock markets fall 4 and 1 percent respectively as their currencies also continued to tumble.
Japan's Nikkei slumped too, falling 2.7 percent, reflecting the exposure of many Japanese companies to India and Indonesia.
The rupee and Indonesia's rupiah as well the Thai baht saw some relief in European trading but Callum Henderson, head of FX research for Standard Chartered, said things may only settle down once the Fed's plans become clear.
"Our base case is that the Fed will announce the start of a modest and gradual tapering at its September meeting, by then it should be fully priced in so it seems logical that we would see some degree of stabilisation," he said.
"If we also get a continued improvement in Chinese economic data then Asian currencies could find a more solid floor but for now having gained so much on the back of Fed QE from 2009 to 2012, some of that is being given back."
Futures prices pointed to another day of pressure for Wall Street where the S&P 500 is currently experiencing its worst run since the end of last year.
Despite the focus on the Fed cutting its stimulus, the dollar fell against a basket of major currencies, a move that left both the euro and sterling at one-month highs.
Emerging market volatility also spurred the yen. "The yen tends to attract buying when tensions in the market increase," said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.
In commodities, copper began to claw back after dropping to $7,264.75 per tonne, while gold eased to $1,364 per ounce after snapping a three-day winning streak on Monday and moving away from a two-month high hit that session.
Brent crude prices fell 0.5 percent to $109.36 a barrel, pressured by the Fed speculation but supported by the loss of Libya's oil exports as well as concerns that continuing unrest in Egypt could spread and interfere with supply.