GLOBAL MARKETS-Stocks up, investors hope for comforting Fed message

* Investors hope for soothing Fed message

* European stocks clouded by banks

* Italian budget relief

By Jamie McGeever

LONDON, Oct 29 (Reuters) - World stocks rose on Wednesday, lifted by corporate earnings and expectations that the U.S. Federal Reserve will indicate later in the day it won't raise interest rates for some time.

European indices lagged their U.S. and Asian peers, however.

Euro zone banking stocks were down almost 2 percent, dragged lower by Germany's biggest lender Deutsche Bank (Xetra: 514000 - news) which announced a third-quarter net loss on heavy legal costs.

The dollar and major government bond yields were little changed. Currency and fixed income markets anticipated a soothing message from the Fed when it ends its two-day policy meeting later in the day.

The Fed is widely expected to announce it will end its two-year-old stimulus programme known as QE3 for the third trance of quantitative. The Fed started buying bonds as far back as late 2008.

Still, Fed officials have also stressed they are in no hurry to take policy tightening a step further by raising rates from near zero levels due to subdued inflation and the poor quality of a recovery in labour markets.

"Any major tightening of monetary policy remains a story for the latter half of 2015," said Nick Gartside, chief investment officer, fixed income, at JP Morgan Asset Management in London.

"The Fed will remain keen to defuse any large scale market turmoil in the immediate term and will continue to focus on language that helps to stabilise the markets," he said.

Germany's DAX and Britain's FTSE were both up two thirds of a percent at midsession, and the pan-European FTSEurofirst index of leading 300 stocks was up a third of a percent.

MSCI (NYSE: MSCI - news) 's broadest index of Asia-Pacific (Shanghai: 601099.SS - news) shares outside Japan .MIAPJ0000PUS gained 1.1 percent and Japan's Nikkei share average .N225 climbed 1.5 percent. This followed the 1.1 percent rise in the S&P500 and Dow Jones on Tuesday.

The three main U.S. indices pointed to a slightly lower open on Wednesday.

Upbeat U.S. earnings so far have also eased worries that corporate profits might be squeezed by sluggish global growth. With 245 companies in the S&P 500 .SPX having reported earnings so far for the third quarter, 73.5 percent have beat analyst expectations, according to Thomson Reuters. Over the past four quarters, 67 percent of companies have beat estimates.

The picture in Europe isn't quite so rosy. About a third of companies listed on the STOXX Europe 600 .STOXX benchmark index have reported results so far this earnings season, with 67 percent of them meeting or beating profit forecasts, and 59 percent meeting or beating revenue forecasts, according to Thomson Reuters Starmine data.

On Wednesday French oil major Total said net adjusted profit fell 2 percent, and shares in French pharma group Sanofi (NasdaqGM: GCVRZ - news) fell 4 percent after the company's board said it had decided to oust chief executive Chris Viehbacher.

In currency trading, the dollar was flat against the Japanese yen at 108.10 yen and the euro was little changed at $1.2730, close to Tuesday's one-week high of $1.2765.

The yield on benchmark 10-year U.S. Treasury bonds was steady at 2.285 percent, as was the German Bund yield at 0.88 percent.

Earlier on Wednesday, Germany sold 10-year bonds at auction but bids failed to match the amount on offer, making it the ninth technically "failed" bond auction this year.

Italian government borrowing costs fell more steeply, after the European Commission gave a tentative thumbs-up to Rome's 2015 budget.

Italy, like France, has been campaigning for Brussels to afford it greater fiscal flexibility in order to nurture fragile economic growth, although their original budget proposals had to be tweaked.

Ten-year Italian yields dropped 3 basis points to 2.52 percent. (Reporting by Jamie McGeever, additional reporting by xxxxxxxx; Editing by xxxxxxxxxxx; 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 Fund Blog Hub click on http://blogs.reuters.com/hedgehub)