GLOBAL MARKETS-China rally, Russia respite lifts shares as focus turns to U.S.

Tue Jul 29, 2014 9:19am EDT

(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)
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