Brent falls more than $1; equities, U.S. Fed weigh


* U.S. Fed to hold two-day meeting, consider tapering

* Deficit problems in emerging markets could hit commodities demand there

* U.S. new-home sales come in lower than expected

By Elizabeth Dilts

NEW YORK, Jan 27 (Reuters) - Oil prices fell more than $1 on Monday as investors continued to dump risky assets on worries about weaker growth in emerging markets.

Global equities markets extended losses from last week on concerns about China's economic slowdown and expectations that the U.S. Federal Reserve will scale back its bond buying by another $10 billion.

The U.S. government also announced weaker-than-expected new home sales data Monday, causing U.S. equities to give back early gains and triggering a correlated dip in Brent and U.S. crude oil futures prices.

"The biggest issues in the crude oil markets are the correlation to risk assets and equities," said Bob Yawger, senior vice president of energy futures at MF Global in New York.

Brent crude was down $1.10 at $106.78 a barrel at 12:15 p.m. EST (1715 GMT).

Brent's premium to U.S. oil narrowed slightly on Monday to $11.11 from a Friday settlement of $11.24. The spread had traded as tightly as $9.47, its lowest price in more than two months, on Friday.

U.S. crude oil futures showed some resistance in the $97 to $98 range where prices ended last week. U.S. crude last traded down 98 cents at $95.65 after briefly falling more than $1.

"The 200-day moving average in WTI was breached, and shorts were covered," said Bill Baruch, senior market strategist at in Chicago. "If the Fed gives a vote of confidence (on Wednesday), I think that could give the equity and crude markets support ... but I think you're going to see people quick to the trigger in selling before the $100 mark."

The Fed will conclude its regular two-day meeting on Wednesday. Analysts said the central bank was intent on cutting the stimulus again in spite of the brutal selloff of emerging market assets in Turkey, Argentina and elsewhere.

Emerging markets had benefited from investment flows when interest rates in the United States and other developed markets were low. But now that the Fed is changing course, investors are getting out of the emerging markets with large current account deficits, raising fears over their future economic health.

Analysts also said concerns over Chinese growth following weaker-than-expected data last week were weighing on Brent. A Reuters poll showed economists expected Chinese gross domestic product growth to slow to 7.4 percent in 2014 from 7.7 percent in 2013.

Capping losses in U.S. crude were forecasts for two more weeks of cold weather in the heavily populated Midwest and Northeast and last week's opening of the southern leg of TransCanada Corp's Keystone pipeline, which will help alleviate the supply bottleneck at the contract's delivery point in Cushing, Oklahoma.

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