GLOBAL MARKETS-China rally, Russia respite lifts shares as focus turns to U.S.
(updates ahead of Wall Street open) * Russia stocks rise after 3 days of selling, Wall Street seen up * Dollar hits new six-month high before US economic news barrage * China & Hong Kong shares buoyed by economic & stimulus hopes * Emerging market shares hit three-year high By Marc Jones LONDON, July 29 (Reuters) - World shares hovered just below all-time highs on Tuesday as investors drew encouragement from a rally in Chinese markets and beaten-down Russian stocks enjoyed some respite after three days of heavy selling. Investors remained cautious, however, reflecting geopolitical jitters and the torrent of U.S. economic news due to come this week, including a Federal Reserve meeting, GDP data on Wednesday and non-farm payrolls figures on Friday. The dollar shuffled higher on bets all that will add up to the Fed hiking interest rates by the middle of next year, while European shares saw gains after another jump in Chinese stocks had lifted Asia to a new three-year high. Wall Street also looked set to open higher. Pfizer and Merck added to a lengthy list of firms to have beaten forecasts in recent weeks and there was an easier mood generally as Russian stocks made ground despite fresh fighting in Ukraine and expectations of more EU sanctions. "The initial fear (of Russia/West tensions) is not really there any more," said Rabobank economist Philip Marey. "So now we are looking at the usual suspects: how strong is the euro zone recovery? How strong is the U.S. recovery? And what does it mean for the central banks?" EU diplomats will hold more talks on Tuesday to try to forge an agreement on the final shape of measures set to target capital markets, defence, and sensitive technologies key to some of Russia's major industries. Although Moscow stocks were up, fears this may not be the last wave of sanctions for a Russian economy already facing the risk of recession continued to drag on the rouble and some of Russia's benchmark bonds. German government bonds also hit new historic highs, with their safe-haven appeal augmented by expectations they will remain attractive compared to near-zero ECB interest rates in the next few years. FED FOCUS Among major currencies, the dollar hit a new six-month peak against a basket of its peers having gone virtually nowhere for much of the day as investors kept to the sidelines ahead of the Fed's meeting. The U.S. central bank is sure to cut its monthly bond-buying programme by another $10 billion as it prepares to wind up the scheme later in the year, but markets will focus on any clues to the timing of its first interest rate hike. With other key data such as U.S. gross domestic product and the closely watched non-farm payrolls report still to come, investors were content to sit on their hands. The New Zealand dollar was the main loser in the developed world, weighed down by further signs of trouble in the country's influential dairy sector, though the euro was also pinned at an eight-month low at $1.3416. Against the yen, the dollar climbed above 102, while the common currency barely budged at 136.90. In commodities, gold idled at $1,308 after a very quiet 24 hours saw it hold to an $8 range. Oil was also treading water, with Brent at $107.57 a barrel though the stronger dollar shaved U.S. crude down to $100.60 FINE CHINA China shares had continued their charge overnight, led by banks stocks after a Reuters report said the country's fifth-biggest bank by assets planned to seek more private investors. The CSI300 index of leading Shanghai and Shenzhen A-shares added 0.5 percent, bringing gains to almost 8 percent in seven sessions and lifting it to a 2014 high. That in turn pushed MSCI's emerging market index to a three-year high and kept the All World benchmark within reach of this month's all-time peak. "The thing everybody is asking at the moment is when the market is going to pull back," said Randy Frederick a managing director at U.S. investment firm Charles Schwab. "But with the current low volatility people aren't waiting for a 5 or a 10 percent correction, even if there is a 1 percent dip they come right back in and start buying again." (Editing by Catherine Evans)