GLOBAL MARKETS-Emerging market rout pauses ahead of Turkey, Fed meetings

* Emerging market shares stabilise, Wall Street seen up 0.2-0.4 percent

* Investors look to Turkey central bank policy meeting

* Markets worry Fed tapering may undermine emerging markets

* China slowdown another concern

* Indian central bank surprises with rate hike, rupee steady

By Marc Jones

LONDON, Jan 28 (Reuters) - Emerging markets steadied after three days of intense selling on Tuesday, as investors waited to see if Turkey, one of the epicentres of the rout, would hike interest rates to defend its battered lira.

Investors have been shaken this week as jitters about the withdrawal of U.S. monetary stimulus and slowing Chinese growth have amplified country-specific political turmoil from Turkey to Thailand.

Relative calm in Asia overnight meant European shares and periphery euro zone government bonds were able to claw back some recent lost ground, although with the approach of this week's Federal Reserve meeting confidence remained fragile.

Wall Street was expected to snap a three-day run of falls when trading resumes, but focus remained firmly on whether the central bank of Turkey would bow to market pressure and hike interest rates at an emergency policy meeting later.

India surprised markets earlier by doing just that, and despite its reluctance to unsettle Turkish voters ahead of elections this year, a new Reuters poll showed analysts now expect the central bank to lift rates by 225 basis points.

The Turkish lira remained volatile ahead of the decision which will be announced at midnight in Istanbul (2200 GMT). It was trading at 2.2670 lira to the dollar, though it kept some distance from the record low of 2.3900 hit on Monday.

Istanbul's main stock market, which has lost almost 20 percent over the last four months, also rose, climbing 1 percent at one point to help MSCI (NYSE: MSCI - news) 's main emerging market index see its first gains in three sessions.

"We think there is room for the central bank to use more conventional monetary policy and that is clearly what the market expects," said Fergus McCormick, head of sovereign ratings for rating agency DBRS.

SOUR APPLE

Over 1 trillion dollars has been wiped off world stocks during a week of turbulence.

Slowing sales at gadget giant Apple (NasdaqGS: AAPL - news) had soured U.S. markets on Monday, but Asia's rebound and a rise in first quarter profits at German engineering behemoth Siemens helped European shares off near-one-month lows.

Futures prices pointed to Wall Street bouncing 0.2-0.4 percent when trading resumes in New York (Frankfurt: HX6.F - news) , with data and company earnings set to enliven the wait until the Fed's decision.

Investors also drew comfort from the news that a Chinese trust firm had reached an agreement to resolve a troubled high-yield investment product. The deal came just days away from what could have been a precedent-setting default in China's alternative, non-bank lending system.

"The deal to avert default is a source of relief for many, but it's a clear warning on the scale of the risks that still remain with other trust products due to mature this year," said Jackson Wong, Tanrich Securities' vice-president for equity sales in Hong Kong.

Major currencies marked time ahead of the conclusion of Fed's two-day policy meeting on Wednesday, with both the euro and the yen down slightly at $1.3650 and 103.12 yen to the dollar respectively.

Despite the market turmoil of the last week, expectations are still for the U.S. central bank to slice another $10 billion off the $75 billion it spends each month on buying bonds to help the banking system and economy strengthen.

Johannes Jooste, head of the London investment office at Julius Baer (Other OTC: JBARF - news) , said the reduction in U.S stimulus was one of the key factors behind the emerging market nervousness.

Investors poured their cash into developing economies when emergency rate cuts during the financial crisis meant U.S., European and other developed market bonds offered little in the way of interest. They are now pulling it back out again as the prospects of higher developed market rates re-emerge.

"We keep getting asked about EM market valuations and whether they have become cheap enough to make them attractive," Jooste said. "Our view is basically not."

FRAGILE FIVE

India's surprise move to hike rates saw the rupee rise 0.7 percent to 62.65 to the dollar and though Mumbai's main stock market grumbled, benchmark 10-year Indian government borrowing costs improved a shade.

Expectations are growing that more emerging central banks will follow suit in a bid to stabilise tumbling currencies that can help exporters but also put upward pressure on inflation.

Brazil, South Africa and Indonesia - some of what have been dubbed the Fragile Five economies which have a strong reliance on external capital - are main candidates. South Africa's central bank meets on Wednesday.

Among commodities, gold slipped on the slight recovery in risk appetite while growth-attuned copper and oil also clawed back some of their recent losses. Gold was last at $1,256 an ounce while Brent oil was hovering up 0.2 percent at $106.85 a barrel.

"We are still pretty bearish on commodities and that doesn't help the emerging market complex," added Julius Baer's Jooste.