GLOBAL MARKETS-Rally on Fed talk fades, dollar struggles


* Rally on Fed taper delay slows, European shares dip

* Wall Street seen firm with Apple results in focus

* Fed meeting could fuel more dollar selling

* Gold, copper steady, Brent oil rebounds

By Richard Hubbard

LONDON, Oct 28 (Reuters) - World share gains stalled near asix-year high and the dollar steadied on Monday as a rally builton expectations the U.S. Federal Reserve will stick with itsloose monetary policy at a meeting this week ran out of steam.

A rise in U.S. stock index futures signaled further gains were possible when Wall Street opened though this was likely todepend on more encouraging news in quarterly corporate earningsreport with tech bellwether Apple in the spotlight.

Most riskier assets rose sharply last week as theuncertainty caused by this month's U.S. government shutdown anda mixed batch economic data convinced many the Fed would delayany move to begin trimming its stimulus into next year.

"The events in Washington have all but cemented the ideathat tapering will be a 2014 event." said Adam Cole, head of G10FX strategy at RBC Capital Markets.

But with the dollar trading near its lowest levels of theyear against most major currencies, the euro near a two-yearhigh and many major global share indexes near record highs,investors are wary of pushing prices higher.

"We are less bullish in the short term than we were over thepast few months. However, we do not envisage a fundamentalchange of direction," J.P.Morgan Cazenove wrote in a note.

Much will depend on what the Fed has to say when it wraps upa two-day rate setting meeting on Wednesday when it is widelyexpected to leave its $85 billion monthly bond buying programunchanged.

"It's the first Fed meeting since the government shutdown inthe U.S. so any clues on when they may potentially taper will bewelcomed by the market," said Greg Matwejev, director of FXHedge Fund Sales and Trading at Newedge said.

The longer the Fed keeps its policy loose, the more U.S.yields stay low, which makes the dollar less attractive.

On Monday the dollar index was down at 79.17, not farfrom a near nine-month low of 78.998 touched on Friday while theeuro had traded up to $1.3810, having touched a high of $1.3833 late last week.

While in the debt market core U.S. and German governmentBund prices traded within tight ranges while investors await theoutcome of the Fed meeting.


MSCI world equity index, which tracks sharemoves in 45 countries, was up 0.2 percent marking a fourth dayof gains as it climbed back to towards a peak last seen inJanuary 2008.

It's gains followed sharp rises earlier in Asia where Japan'sNikkei climbed 2.2 percent, clawing back most ofFriday's 2.7 percent drop, and Australian shares put on1.0 percent to end at a five-year high.

China's main share index, the CSI300, did buck thefirmer trend to post a fifth straight loss as concerns about thegovernment's efforts to cool inflation and rising propertyprices with higher short-term rates weighed on sentiment.

After opening strongly in line with Asian markets Europe'smain indexes had turned lower by midday, reflecting a more mixedset of corporate earnings announcements and the caution over therecent run up.

The broad FTSEurofirst 300 index was down 0.3percent as it shed some of last week's 0.6 percent gain whichhad taken the index to a five-year high.

The likelihood that Fed cash will keep flowing into thefinancial system for longer than many had anticipated wassupported gold and other metal markets, but after strong gainslast week these markets were also wary of pushing higher.

Spot gold was unchanged at $1,352 an ounce, still notfar off a five-week high of $1,355.20 set on Friday. Copper was flat at $7,182 a tonne.

In the oil market, the positive sentiment flowing from theequity market had encouraged a slight rebound, with the globaloil benchmark rising 71 cents to $107.69 a barrel though themarket's attention was on developments in Libya which couldthreaten oil supplies.

Libya's crude oil exports have fallen to the lowest level insix weeks after operations at a key port were suspended over theweekend following fresh unrest.

"When there is less Libyan crude available it puts pressureon Brent, which are of similar light sweet grades," saidChristopher Bellew, oil trader at Jefferies Bache.

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