(Updated prices after US stock market close)

By Sinéad Carew and Alun John

NEW YORK/LONDON, Aug 7 (Reuters) - Wall Street equity

indexes closed lower after Wednesday's choppy session while a

bond auction pushed Treasury yields higher and the dollar rose

against the yen after cautious central banker comments.

Oil prices rose after a bigger-than-expected draw in U.S.

crude stockpiles and on potential escalation in the Middle East,

even as investors worried about weak demand in China.

Earlier, Bank of Japan Deputy Governor Shinichi Uchida said

the central bank will not raise interest rates while financial

markets are unstable, pushing the yen down.

But in equities, the Nikkei rose 1%, adding to

Tuesday's 10% rebound from Monday's sell-off. The Nikkei's 12.4%

plunge had started a global stock rout as investors went into

risk-off mode.

After opening higher on Wednesday, Wall Street's benchmark

S&P 500 started losing ground in the late morning and fell

further following a U.S. 10-year Treasuries auction.

"It's a little more than a weak 10-year auction, which I'm

sure contributed," said Lindsey Bell, chief strategist at 248

Ventures in Charlotte, NC. "You don't just have the fall we had

on Monday and it's done. You typically test the lows again

before we can move out of this downtrend."

She also noted that some investors are "taking advantage of

short-term pops in stocks" to take profits.

On Wall Street, the Dow Jones Industrial Average fell

234.21 points, or 0.60%, to 38,763.45, the S&P 500 lost

40.53 points, or 0.77%, to 5,199.50 and the Nasdaq Composite

lost 171.05 points, or 1.05%, to 16,195.81.

MSCI's gauge of stocks across the globe fell

0.35 points, or 0.05%, to 770.64 after earlier rising to a

session high of 783.83. Europe's STOXX 600 index had

closed up 1.5%.

In currencies, the yen dropped after the BoJ comments on

rate increases, which soothed investors' concerns about

volatility in the Japanese currency, which had soared against

the dollar on Monday on fears of a U.S. recession, causing a

broader market rout.

Against the Japanese yen, the dollar strengthened

1.75% to 146.83.

The dollar index, which measures the greenback

against a basket of currencies including the yen and the euro,

gained 0.2% at 103.19, with the euro down 0.08% at

$1.0921.

U.S. government bond yields rose after the Treasury

Department saw soft demand for a $42-billion sale of 10-year

notes and as companies rushed to sell debt with risk appetite

improving. Supply was the main focus as traders were waiting on

fresh economic data for clues about the strength of the U.S.

economy.

The yield on benchmark U.S. 10-year notes rose 7

basis points to 3.958%, from 3.888% late on Tuesday. The 30-year

bond yield rose 8.1 basis points to 4.2579%.

The two-year note yield, which typically moves in

step with interest-rate expectations, fell 0.2 basis points to

3.9827%, from 3.985% late on Tuesday.

In energy markets, U.S. crude settled up 2.77% at

$75.23 a barrel and Brent rose to $78.33 per barrel, up

2.42% on the day.

In precious metals, spot gold lost 0.2% to $2,384.59

an ounce. U.S. gold futures fell 0.05% to $2,387.80 an

ounce.