GLOBAL MARKETS-Shares push higher, bonds steady before Fed
* Fed expected to end QE after two-day meeting
* Wall Street points to higher open, Twitter (Xetra: A1W6XZ - news) 's wings clipped
* European, Asian shares up; Nikkei wilts despite data
* Dollar firmer after overnight weakness, bond yields flat
By Marc Jones
LONDON, Oct 28 (Reuters) - World stocks and U.S bond yields
extended almost three weeks of steady gains on Tuesday, as
markets prepared for the Federal Reserve to formally end six
years of aggressive, crisis-driven monetary stimulus.
The Fed kicks off a two-day meeting later with analysts
wagering that it will try to soothe the recent market volatility
by reinforcing that, while stimulus is being wound up, it could
wait quite a while before raising interest rates.
With the euro zone hobbled and China's giant economy
struggling to regain pace, the prospect of a world without the
crutch of U.S. stimulus has troubled markets, but they finally
seem to be getting used to the idea.
European shares rose for the fourth time in six
days, helped by better-than-expected results from pharmaceutical
group Novartis (Xetra: 904278 - news) and Swiss bank UBS (NYSEArca: FBGX - news) , as the
dollar, commodity markets and U.S. yields also nudged higher.
"In the last few days we have had a reality check," fund
management group Hermes' chief economist, Neil Williams, said.
"The world is certainly not a happy place at the moment but it
hasn't got that much worse in recent weeks.
"I'm expecting the Fed to re-assert its dovishness; they
haven't come this far -- including six years of QE (quantitative
easing) -- to end it abruptly and leap towards a rate hike."
Markets currently expect the Fed to make the first tentative
increase at the end of next year but with U.S. inflation
weak, Europe stumbling and the dollar on the rise, the big
question is to what extent it acknowledges risks to the U.S.
recovery.
Helping fill the wait for the Fed, markets have a heavy set
of economic data to digest including industrial production, home
prices and consumer confidence that will give the latest
temperature reading of the world's largest economy.
Wall Street futures pointed to early gains of 0.5-0.6
percent, though Twitter shares fell 13.1 percent in
premarket trading after it posted a slide in a closely-watched
measure of usage.
In tandem with rising stocks, gold recovered its
footing after falling to its lowest in nearly two weeks, while
emerging market stocks, which are also seen as
vulnerable to reduced stimulus, rose 0.7 percent as hopes of
more reforms of state-owned firms helped Chinese stocks
jump 2 percent.
CROWN SLIPS
As European banks continued to benefit from their weekend
stress-test results, London's FTSE, Germany's DAX
and France's CAC rose 0.5, 1.5 and 0.5 percent.
In the currency market, the dollar the dollar edged
lower after a surprise drop in U.S. durable goods orders and the
euro, the pound and benchmark German government
bonds traded little changed.
Sweden's crown though slid to a four-year low against the
dollar and a four-month trough against the euro after the
central bank, the Riksbank, surprised markets with a cut in
interest rates to zero.
Like many advanced economies, Sweden is fighting the threat
of deflation. Most analysts had forecast the bank would lower
rates to 0.1 percent from 0.25 percent, but it went a step
further and also forecast an even lower future rate path.
"Reading between the lines, it looks like the Riksbank will
keep rates low ... This will weigh on the Swedish crown, with
most losses likely to come against the dollar," SEB (Paris: FR0000121709 - news) 's chief
currency strategist in Stockholm, Carl Hammer, said.
Among commodities, U.S. crude was flat at $81.50 per
barrel after dropping as low as $79.44 on Monday, its lowest
level since June 2012, after Goldman Sachs (NYSE: GS-PB - news) cut price forecasts.
Brent crude added 0.2 percent to $86.03 as concerns
about weak global demand and ample supply receded and
growth-attuned metals -- copper, nickel and
aluminium -- continued their recent rebound.
But the firmer commodity prices did little for Russia's
rouble, which fell 0.7 percent to another record low against the
dollar despite interventions from the central bank and the
chance of further action when it meets on Friday.
(Editing by Louise Ireland/Ruth Pitchford)