GLOBAL MARKETS-Oil profits lift Europe shares, dollar gains ahead of Fed
* Fed expected to maintain stimulus programme on Wednesday
* World rally stalls, European shares rebound on oil profits
* Dollar index edges up as sellers retreat
* Gold retreats from 5-week high and oil slides lower
LONDON, Oct 29 (Reuters) - Strong earnings from global oil giants led a rebound in European shares on Tuesday as other major markets settled into narrow ranges ahead of a U.S. Federal Reserve policy decision on the future of its stimulus programme.
Markets expect Fed policymakers will vote to extend the central bank's current $85 billion monthly bond-buying scheme into next year while it assesses the impact of this month's government shutdown on economic growth.
Although many investors are wary of potential surprises when the Fed presents the outcome of its two-day meeting on Wednesday, most see the rally in riskier assets over the past week and a dollar selloff as largely factoring in the decision.
"People are more sanguine about the event risk from the Fed, and I think quite a few investors are comfortable with the fact that a Fed move could be delayed until March," said Dennis Jose, European equity strategist at Barclays Capital.
In the meantime attention has switched to corporate earnings.
"If earnings and earnings momentum start to pick up you should see the (equity) market go up, especially with the view that the Fed will not do anything until March," Jose said.
Britain's BP kicked off the results season for top global oil firms on Tuesday with a forecast-beating profit and a dividend hike. Exxon Mobil, Chevron, Royal Dutch/Shell and Total all report results later this week.
BP's results helped reverse a weaker start for the pan-European FTSEurofirst 300 index, helping it to a 0.3 percent rise by midday, on its way back towards the 5-year peak posted last week.
The oil giant's gains also offset a disappointing set of numbers from three of Europe's biggest banks, which all suffered third-quarter hits from the rising cost of an industry cleanup after a string of scandals.
The European share rise bucked the trend seen earlier in Asia, where MSCI's broadest index of Asia-Pacific shares outside Japan lost about 0.3 percent and Japan's Nikkei stock average gave up 0.5 percent.
U.S. stock index futures signalled that Wall Street was facing a flat start as the recent run of corporate results, including a mixed report from tech giant Apple, failed to inspire traders to push prices on from near-record levels.
MSCI's world equity index, tracking shares in 45 countries, was virtually unchanged as a four-day streak of gains ran out of steam.
The upcoming Fed policy decision remained the dominant factor in the currency and fixed income markets, with the dollar drawing support from a stabilisation in U.S. Treasury bond yields.
The dollar gained 0.3 percent against a basket of currencies to 79.478 in thin volumes, as many players withdrew from the market ahead of the Fed meeting.
"There is a lightening of positions before the Fed, but volumes are low - at least 20-30 percent lower than usual," said Alvin Tan, currency strategist at Societe Generale.
The euro, which has benefitted from the dollar's recent decline and hit a two-year high of $1.3833 on Friday, was down 0.2 percent at $1.3760.
"One gets the feeling speaking to clients that moves in the euro and expectations that the Fed will be dovish have gone too far," said Manuel Oliveri, FX strategist at Credit Agricole. "To that extent, we think the dollar's downside is limited."
Dealers also said investors were wary of pushing the single currency any higher, given concerns that the European Central Bank may express unease at the currency's strength.
German Bund futures were flat at 141.19, staying near a two-month high of 141.23 hit on Monday. Cash 10-year German yields were unchanged at 1.75 percent.
Gold, which has risen 8 percent since mid-October to close in on a five-week high, shed about 0.5 percent to around $1,345.50 an ounce as its rally ran out steam.
"The main focus remains on the Fed and the market seems to have factored in the central bank will not change its current accommodative stance," VTB Capital analyst Andrey Kryuchenkov said.
Brent crude fell $1 a barrel to below $109, though traders said this was more of a consolidation after gains the previous day, when reports of a sharp drop in Libyan oil exports rekindled worries over supply.
Libya's crude oil exports have dropped to less than 10 percent of capacity due to the worst disruption in its oil industry since the 2011 civil war.