* Fed begins two-day policy meeting on Tuesday * European shares reverse Monday's gains, bonds cautious * Euro supported by robust German ZEW sentiment * Gold and oil ease back after recent push By Marc Jones LONDON, Dec 17 (Reuters) - European shares and bonds got off to a weak start and the dollar hovered cautiously on Tuesday as the Federal Reserve prepared for a two-day meeting where it may start to wind down its stimulus programme. A majority of economists polled by Reuters still expect the Fed to wait until March before it starts to scale back its $85-billion-a-month bond-buying programme. But recent data have steadily shortened the odds on a move in January, or even this week. "Although we have heavier odds pinned on the tapering being announced in January, we think the economic case has already been made for pulling the trigger," analysts at Societe Generale wrote in a note. "The only reason to delay would be to give the FOMC the opportunity to strongly signal its intent to taper in January. In either case - actual taper or signal of impending taper - we expect the 10-year U.S. Treasury yield to test 2.9 percent." Treasuries were steady at 2.8683 percent in early European trading. They had inched up on Monday after solid U.S. manufacturing figures, but European government bonds started on the back foot. European share markets also got off to a weak start. Declines of 0.5, 0.4 and 1 percent on London's FTSE, Paris's CAC 40 and Frankfurt's Dax took back much of the gains they had made on Monday and bucked earlier rises in Asia. The to-and-fro of when the Fed will begin to halt the flow of cheap dollars has dominated trading worldwide for months. Investors may find out on Wednesday, when the bank concludes its meeting with a live news conference. As traders set up their final positions for the Fed, the so-called 'fear gauge,' the VIX volatility index, was testing a two-month high, although in the currency market there was little movement from the dollar. FED FOCUS Many analysts have been expecting the dollar to rise as the prospect of tapering strengthens. It has made some ground against the yen, but the euro's recent strength has all but cancelled out the gains. One reason has been tighter euro money markets as banks have repaid cheap ECB loans faster than expected. That has cut the central bank's balance sheet by 8 percent this year, although Frankfurt has shown no real alarm at the move. The euro was barely changed at $1.3761 at 1030 GMT, giving up gains it made after Germany's ZEW business sentiment came in well above expectations, reaching its highest level since April 2006. It also stayed within reach of a five-year peak against the yen, advancing about 0.1 percent to 141.82 yen, and rose against the Swedish crown after the Riksbank cut the repo rate, as expected. Further gyrations may come later with the release of U.S. inflation data. Subdued U.S. prices have been one of the things holding Fed policymakers back from tapering. Any sign they are firming would bolster the case for a move. "(Euro/dollar) above $1.35 is not fundamentally justified if you look at what's happening in the U.S. and Europe. But underlying flows are euro-positive," said Carl Hammer, chief currency strategist at SEB in Stockholm. "Obviously, everyone is waiting for the Fed decision. We are looking for the Fed to initiate cautious tapering." DECISION DAY Early indications also pointed to a cautious start on Wall Street. The S&P 500 rose on Monday, but it was a move that came after its worst week since August. In emerging markets, the wait for the Fed meant the Indian rupee, Indonesian rupiah and Philippine peso underperformed their Asian peers. Focus also remained on the upheaval in Ukraine. President Viktor Yanukovich is heding to the Kremlin, seeking a financial lifeline, while demonstrators in Kiev gather again to demand he steps down. In the southern hemisphere, the Australian dollar was little changed near a 3-1/2 month low after the Reserve Bank of Australia said there were signs its past cuts in interest rates were working, though it wouldn't rule out further moves. "Money-market pricing on the next full 25 basis points move remains for a hike in 2015, suggesting that there may be some further scope for AUD-negative adjustment," Todd Elmer, head of G10 strategy for Asia ex-Japan at Citigroup in Singapore. Among commodities, U.S. crude prices eased 0.2 percent to about $97.3 a barrel. Brent dropped to $108.63. Gold dipped to around $1,246 an ounce as it struggled to keep a grip on a third day of gains.