* MSCI world equity index down 0.8 percent
* Dollar hits 15-yr low vs broadly firmer yen after Fed
* Oil down 1.2 pct; government bonds firmer
By Natsuko Waki
LONDON, Aug 11 (Reuters) - The dollar hit a 15-year low versus a broadly firmer yen on Wednesday while world stocks fell to a 1-1/2 week trough as the Federal Reserve's dovish assessment of the U.S. economy knocked Treasury yields lower.
Data showing slowing Chinese investment and factory output growth, coupled with a Bank of England downgrade of its growth forecast and a dovish tone from its Governor Mervyn King, also prompted investors to cut back on risky assets. On Tuesday, the Fed announced plans to use cash from maturing mortgage bonds it holds to buy more government debt, saying the pace of the recovery in output and employment had slowed in recent months.
Investors decided the U.S. central bank's action was unlikely to have much immediate impact on the labour market and consumer spending, although the move reinforced expectations the Fed would keep interest rates low for longer.
"The comments from the Fed yesterday are weighing on the market. There is a bit of nervousness about the outlook for the U.S. economy and we see some economy-sensitive stocks among the worst performers," said Heinz-Gerd Sonnenschein, equity markets strategist at Deutsche Postbank in Bonn, Germany.
The dollar fell as low as 84.75 yen
The FTSEurofirst 300 index <.FTEU3> dropped 1.3 percent.
U.S. stock futures were down around 1.3 percent
Emerging stocks <.MSCIEF> were down 0.9 percent.
The Bank of England revised its growth forecasts lower and said British inflation will fall well below its 2 percent target in two years, even if interest rates remain at record lows, leaving room for more policy easing if the economy worsens.
In China, data showed growth in investment and factory output slowed further last month as the government brought credit growth back to normal after a record lending spree in 2009 to counter the global financial crisis.
The dollar was up 1 percent versus a basket of major currencies <.DXY> as investors who became risk-averse sold higher-yielding currencies against the U.S. currency.
U.S. two-year Treasury note yields fell as low as 0.493
percent
"The fall in U.S. yields is a barometer of the cyclical position of the U.S. economy," said Adam Cole, head of currency strategy at RBC Capital Markets.
"The market's reaction is that if the U.S. economy is slowing materially it will not be in isolation and it has therefore responded by selling risk."
U.S. crude oil
The Bund futures