(Adds gold, oil settlement prices)
* China's yuan surges to 16-month high on economic data
* Gold slips as dollar rebounds, all eyes on Fed
* Oil rises but bleaker demand outlook weighs
* Central bank meetings dominate week's agenda
* Graphic: 2020 asset performance http://tmsnrt.rs/2yaDPgn
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
By Herbert Lash
NEW YORK, Sept 15 (Reuters) - Global equities rallied on Tuesday, first on upbeat Chinese data and later on an increase in U.S. factory output, while the dollar see-sawed on uncertainty regarding the Federal Reserve's outlook on the economy when policymakers meet this week.
Gold retreated and investors drove longer-term U.S. Treasury yields higher, steepening the closely-watched yield curve, as the Fed began a two-day meeting.
U.S. factory production increased for a fourth straight month in August despite signs of strain in the recovery, while U.S. import prices rose more than expected, supporting the view that inflation pressures were building.
The Fed in the last Federal Open Market Committee meeting embarked on a new approach to inflation, voting to allow its pace to run above average for longer to ensure the recovery isn't snuffed just when the economy begins to roll.
"We believe the Fed's commitment to stoking inflation could cause dramatic volatility in interest rates, which could hurt stock prices," said Andrew Smith, chief investment strategist at Delos Capital Advisors in Dallas.
Data showed Chinese industrial output accelerated the most in eight months in August, up 5.6%, to spark a jump in the yuan to a 16-month high. Retail sales in China also grew for the first time this year, beating forecasts.
Commodity-linked currencies such as the Australian, New Zealand, and Canadian dollars gained after the positive Chinese data.
"China is an economic winner at this point in the pandemic," said Kit Juckes, head of FX strategy at Societe Generale.
MSCI's all-country world index rose 0.65% to 576.43, while Europe's broad FTSEurofirst 300 index added 0.71% to 1,439.08.
On Wall Street, the Dow Jones Industrial Average rose 0.29%, the S&P 500 gained 0.72% and the Nasdaq Composite added 1.38%.
The S&P tech index jumped 1.0% as it recovered for a second day from a plunge at the end of last week that had knocked the Nasdaq into corrective territory, defined as a 10% slide from a recent peak.
MSCI's emerging markets index rose 0.75%.
The euro initially gained after the ZEW economic sentiment survey showed investor sentiment in Germany rose in September, but later slipped amid headwinds from Brexit and rising coronavirus infections.
Euro zone bond yields were steady to a bit lower, shrugging off the positive economic sentiment data from Germany and the improvement in risk appetite that lifted global stock markets.
The dollar index rose 0.024%, with the euro down 0.16% to $1.1849.
The Japanese yen strengthened 0.26% versus the greenback at 105.45 per dollar.
Overnight, MSCI's broadest index of Asia-Pacific shares outside Japan added 0.5% for a fourth straight day of gains that have boosted it 3% for the year after its recent reversal from its coronavirus plunge.
In commodity markets, most industrial metals were bolstered by the robust Chinese data.
Oil prices rose, supported by hurricane supply disruptions in the United States, but forecasts of a slower-than-expected recovery in global demand from the pandemic weighed.
Brent crude futures rose 92 cents to settle at $40.53 a barrel. U.S. crude futures settled up $1.02 at $38.28 a barrel.
Gold slipped from a near-two week high as the dollar rose, although hopes for a dovish monetary policy stance from the Fed limited the safe-haven metals' losses.
U.S. gold futures settled up 0.1% at $1,966.20 an ounce.
(Reporting by Herbert Lash, additional reporting by Elizabeth Howcroft in London; editing by Daniel Grebler and Nick Zieminski)