* World shares add to last week's losses
* Wall Street set for gains after sharp losses on Friday.
* European shares weak, Japan down 2.31 percent
* Dollar slips after gains
By Jeremy Gaunt, European Investment Correspondent
LONDON, Nov 2 (Reuters) - World stocks added to the previous week's losses on Monday, hugging one-month lows as investors pulled back from a more than seven month rally and prepared for the eventual withdrawal of stimulative monetary policy.
Wall Street, however, looked set for a positive start after Friday's heavy losses on a day that also saw the VIX volatility index surge.
The dollar slipped against major currencies after enjoying its biggest weekly gain since early June.
Investors were bracing for a week of meetings at major central banks, including the U.S. Federal Reserve and European Central Bank, the release of minutes from the past meetings of others and a G20 finance ministers' meeting. [M/DIARY]
At issue in all cases is the future of the liquidity that has been behind much of this year's financial market recovery, in the form of low interest rates and quantitative easing designed to pump money into the financial system.
"It's central bank week," said one bond trader.
News that CIT Group INC
World stocks as measured by MSCI <.MIWD00000PUS> were down 0.2 percent, adding to last week's more than 4 percent loss, the largest since early March just before the rally began. Emerging market stocks <.MSCIEF> lost 0.6 percent.
Wall Street's favorite pulse of investor sentiment, the Chicago Board Options Exchange Volatility Index <.VIX> or VIX, rocketed 23.95 percent higher to 30.69 on Friday, the highest it has been since July.
In addition, cross-sectional volatility -- or the volatility between stocks as opposed to just the index -- has also been rising;.
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For graph on cross-sectional volatility, click on:: https://im.collab.reuters.net/file/190vtgzujg/Vol.GIF
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Some of this may be because of the time of year. Credit Suisse estimates that 22 percent of mutual funds end their fiscal years at the end of October, and those managers may have been selling last week to capture profits.
European shares hit a four-week low on Monday, extending the previous session's sharp declines, but later recovered a bit. The FTSEurofirst 300 <.FTEU3> index of top European shares down 0.1 percent at. It fell 2.1 percent on Friday.
"Everybody is anxious and knows that the market went a little bit too fast," said Koen De Leus, economist at KBC Securities.
Earlier, Japan's Nikkei stock average <.N225> fell 2.3 percent to hit a three-week closing low.
DOLLAR DITHERS
The dollar was lower against a basket of major currencies <.DXY>, but only after gaining more than 1 percent last week, its best performance since the week ending June 7.
The currency has lost 6 percent this year as investors have deserted it for higher-yielding competitors and returned to non-U.S. stock markets after last year's flight.
The euro was up 0.4 percent at $1.4777
Euro zone bonds were mixed, with demand stronger for shorter-dated debt. (Additional reporting by Atul Prakash and Kirsten Donovan; Editing by Ruth Pitchford and Andy bruce) (To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting; for the MacroScope Blog click on http://blogs.reuters.com/macroscope; for Hedge Hub click on http://blogs.reuters.com/hedgehub)