* First Fed hike expected in March, three more by year-end
* S&P futures up 1% after overnight fall
* European stocks, FTSE rise more than 1%
LONDON, Jan 26 (Reuters) - World stocks edged up and the
dollar was flat ahead of the outcome of the Federal Reserve's
policy meeting on Wednesday, while oil rose towards recent
seven-year highs on tension between Russia and Ukraine.
The Fed is due to update its policy plan at 1900 GMT after a
two-day meeting. A first rate increase is seen in March and
markets are already pricing in three more quarter-point
increases by year-end.
The MSCI world index rose 0.32%. U.S.
equities were more upbeat, however, with U.S. S&P futures
up 1.01% after the index lost 1.22% in the previous
European shares climbed 1.47% and Britain's FTSE
100 gained 1.38%.
U.S. stocks posted their worst week since 2020 last week,
and the MSCI index is on course for its biggest
monthly drop since the COVID-19 pandemic hit markets in March
2020, though analysts at Goldman Sachs said equities had not
reached "danger zone" levels.
Sebastien Galy, senior macro strategist at Nordea Asset
Management, said that given the recent volatility, he expected
the Fed would be "far more cautious about the timing and pace of
the balance sheet reduction and that will be welcomed by the
Growing tension as Russian troops massed on Ukraine's border
have added to a risk-averse environment for investors.
U.S. President Joe Biden said on Tuesday he would consider
personal sanctions on President Vladimir Putin if Russia invaded
Ukraine, as Western leaders stepped up military preparations and
made plans to shield Europe from a possible energy supply shock.
U.S. crude rose 0.27% to $85.82 a barrel after
getting close to $88 last week. Brent crude rose 0.44%
to $88.57 per barrel.
The dollar index was steady at 96.08 against a
basket of major currencies, and the euro was at $1.1286,
near one-month lows set on Tuesday.
The Canadian dollar strengthened around 0.4% to 1.25905
versus the dollar. Odds are split on whether or not the
Bank of Canada will raise rates for the first time since 2018 on
Wednesday, with Omicron seen potentially delaying the start of
an aggressive tightening campaign aimed at taming inflation.
U.S. Treasury yields on two-year notes inched up
to 1.0433%, holding onto gains made earlier this month. The
yield on benchmark 10-year Treasury notes was
1.7851%, a little below the two-year high of 1.9% hit last week.
German 10-year government bond yields edged up to -0.069%
MSCI's broadest index of Asia-Pacific shares outside Japan
was unchanged, after sharp losses earlier in the
week which have left the index off 2.8% this year. It is testing
mid-December's one-year low.
Japan's Nikkei traded 0.44% lower, close to its
lowest level since December 2020.
China's blue-chip index hit its lowest since
October 2020 before reversing to close up 0.72%. Hong Kong's
Hang Seng Index was up 0.12%.
Hao Hong, head of research at BOCOM International, expects
limited appetite from investors to hold big positions in Asia
after heavy market selling as the Lunar New Year holiday
Gold prices ticked down to $1,844 per ounce, after
hitting a 10-week high in the previous session.
(Additional reporting by Stella Qiu in Beijing and and Alun
John in Hong Kong; Editing by Lincoln Feast and Kim Coghill)