World stocks gain ahead of Fed meeting; oil watches Russia-Ukraine tension

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 session.
European shares climbed 1.47% and Britain`s FTSE 100 gained 1.38%.

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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 equity market".

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. [O/R]

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. [US/]

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 approaches.

Gold prices ticked down to $1,844 per ounce, after hitting a 10-week high in the previous session. [GOL/]