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GLOBAL MARKETS-Focus firmly on Fed, oil pulls out of dive

Published 15/03/2017, 10:17 pm
© Reuters.  GLOBAL MARKETS-Focus firmly on Fed, oil pulls out of dive
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* Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh

* Dollar, bond yields lower ahead of expected Fed hike

* Oil snaps out of a 6-day, 11-percent slide

* European focus on Dutch elections

By Marc Jones

LONDON, March 15 (Reuters) - Markets focused on what is expected to be a third rise in U.S. interest rates since the financial crisis later on Wednesday, while there was also relief in commodity markets as oil pulled out of a six-day dive.

The dollar slipped against the euro EUR= , the yen JPY= and the pound GBP= after a near 3 percent gain over the last five weeks, while U.S. bond yields hovered at just under 2.6 percent and gold rose for the first time in three days.

"We are estimating three Fed rates hikes this year, we have seen some talk that they might be a bit behind the curve and four might be on the table but we don't think that is the case," Kully Samra, UK Managing Director at Charles Schwab (NYSE:SCHW), said.

New economic projections from the Fed, including its 'dot plot' showing what policymakers expect to happen with rates, and a Janet Yellen press conference will all be key, he added.

Oil was the other main market mover, pulling out of a six-day slide that had seen Brent crude LCOc1 drop by more than 10 percent from $56.50 a barrel to the cusp of $50.

It was last up 1.4 percent at $51.64 a barrel with U.S. WTI back up to almost $49. O/R Those moves helped boost European shares FTEU3 as basic resource stocks rallied in tandem. .EU

The focus in Europe is on Dutch elections where anti-EU firebrand candidate Geert Wilders will provide the latest test of anti-establishment and anti-EU sentiment after Brexit. It also comes ahead of votes later this year in France and Germany, the two biggest economies in the euro zone.

The euro edged up 0.2 percent to $1.0624 EUR= but remained below Monday's more than 1 month high of $1.0714, while euro zone government bond yields dipped. GVD/EUR

The latest Dutch opinion polls put the centre-right VVD party of Prime Minister Mark Rutte ahead of Wilders' PVV (Party for Freedom) by 3 percentage points.

"The repercussions for France are the key aspect of this election, and if we see that the populists are keeping their momentum that will be reflected in French government bonds," DZ bank strategist Christian Lenk said.

FED FOCUS

Sterling fell back below $1.22, halving its day's gains, after data for the three months to January showed a deeper-than-expected fall in the pace of wages growth, the latest sign a previously robust economy may be stuttering.

London's main FTSE stock exchange index .FTSE , whose internationally-focused stocks tend to gain when sterling weakens, turned higher after the data to stand 0.3 percent up on the day. .EU

In the United States, Fed fund futures FEDWATCH are pricing in a more than a 90 percent chance of a rise in rates later. Core CPI, retail spending data and New York Fed manufacturing figures are also due. ECONG7

The dollar pullback ahead of the decision allowed emerging equities and currencies to post modest gains with the Indian rupee outperforming for the second day as it raced to a new 16-month high. EMRG/FRX

Wall Street futures were pointing higher in New York too. Charles Schwab's Samra added that research showed U.S. stocks tend to do better when the Fed takes it slowly in the first year of a rate hike cycle but picks up the pace in the second year.

The Bank of Japan also began a two-day monetary policy meeting on Wednesday. It is expected to hold its policy steady and stress that inflation is nowhere near levels that justify talk of withdrawing its massive stimulus. posted its second-biggest daily gain this year in the previous session, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS ended up a cautious 0.17 percent overnight. Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Editing by Alexander Smith)

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