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NEW YORK (Reuters) - World stock indexes fell on Monday as a Federal Reserve official's comments added to investor concerns the bank may start raising interest rates in September, while oil prices jumped more than 8 percent, extending their biggest price surge in 25 years.
The S&P 500 registered its biggest monthly percentage drop since May 2012 after being pummeled in the past two weeks on concerns about slowing growth in China.
U.S. crude oil futures jumped 8.8 percent, helped by a downward revision of U.S. crude production data and OPEC's readiness to talk with other producers.
Fed Vice Chairman Stanley Fischer said in a speech at the annual Jackson Hole, Wyoming, central bankers' symposium over the weekend that U.S. inflation was likely to rebound, allowing rates to rise gradually.
Many analysts took Fischer's comments as a sign the Fed would raise rates in September, instead of December. That shook already jittery stock investors.
"If they move in September, it's going to cast a lot of doubt about where they will stop," said Stephen Massocca, chief investment officer at Wedbush Equity Management LLC in San Francisco.
The Dow Jones industrial average .DJI fell 114.98 points, or 0.69 percent, to 16,528.03, the S&P 500 .SPX lost 16.69 points, or 0.84 percent, to 1,972.18 and the Nasdaq Composite .IXIC dropped 51.82 points, or 1.07 percent, to 4,776.51.
The Dow, down 6.6 percent for August, registered its worst monthly percentage decline since May 2010. The Nasdaq, off 6.9 percent for August, and the S&P 500, down 6.3 percent, both posted their worst months since May 2012.
MSCI's all-country stock index .MIWD00000PUS lost 0.7 percent and was down 7 percent for the month, also the worst monthly drop since May 2012.
The pan-European FTSEurofirst 300 stocks index .FTEU3 closed down 0.2 percent and registered a monthly loss of 9 percent - its worst monthly performance since August 2011.
The dollar eased against the safe-haven yen and the low-yielding euro as investors sold equities and pared bets against currencies popularly used to fund risky carry trades.
But Fischer's comments limited the dollar's losses. The dollar shed 0.4 percent to 121.19 yen JPY=, while the euro rose 0.5 percent to $1.1236 EUR=.
U.S. crude oil prices have risen more than $10 a barrel in three days, erasing the month's declines.
U.S. crude CLc1 jumped $3.98, or 8.8 percent, to settle at $49.20 a barrel, taking three-day gains to 27.5 percent, the most over three days since August 1990. In dollar terms, it was the biggest three-day gain since February 2011.
Brent October crude LCOc1 climbed 8.2 percent to settle at $54.15 a barrel.
In the U.S. bond market, longer-dated U.S. Treasuries prices fell after lower U.S. oil production and OPEC's readiness to talk with other producers heightened inflation fears. Fischer's comments hurt shorter-dated prices.
U.S. 30-year Treasury bonds US30YT=RR were last down 31/32 in price to yield 2.96 percent, up from a yield of 2.91 percent late Friday. Benchmark 10-year Treasuries US10YT=RR were last down 8/32 to yield 2.21 percent, from 2.18 percent late Friday. Yields move inversely to prices.
Gold steadied, with spot gold XAU= up 0.04 percent at $1,134 an ounce.
Additional reporting by Robert Gibbons in New York, Noel Randewich in San Francisco, and Nigel Stephenson in London; Editing by James Dalgleish, Dan Grebler and Lisa Shumaker