* Markets await possible Fed move to prop up economy
* Crude, copper down as China imports slow in July
* Chinese stocks fall nearly 3 pct
By Dominic Lau
LONDON, Aug 10 (Reuters) - The dollar rose and world stocks
slipped on Tuesday as investors stayed cautious ahead of likely
moves by the U.S. Federal Reserve to warn about and possibly
prop up a faltering economic recovery.
Commodity prices eased after data showed Chinese imports
slowed in July.
Speculation has been growing that the U.S. central bank will
at its meeting later on Tuesday signal a need for more stimulus
to support growth or possibly restart asset purchases, as data
since the Fed's last policy-setting meeting in late June has
been weak.
U.S. consumer spending is petering out and manufacturing is
losing steam, while the unemployment rate is stuck at 9.5
percent.
Mere acknowledgement of a blip might disappoint some
investors who have been betting the Fed would make a more
concrete move, such as buying bonds to pull down market rates,
known as quantitative easing.
"We're seeing some squaring up of short positions ahead of
the Fed, and there is some risk-off sentiment as well as Asian
stocks closed lower, prompting a sell-off in high yielders such
as the Australian dollar," said Christian Lawrence, currency
strategist at RBC Capital Markets.
The euro fell 0.6 percent to $1.3153 <EUR=>, sterling
slipped 1 percent to $1.5749 <GBP=D4> and the Australian dollar
was down 0.7 percent at $0.9103 <AUD=>.
The dollar advanced 0.5 percent against a basket of
currencies <.DXY>. Against the yen the greenback was down 0.1
percent at 85.87 yen <JPY=>.
The Bank of Japan on Tuesday held off on new policy steps to
combat a stronger yen, saving its limited firepower in case the
currency's rise accelerates and threatens the country's fragile
recovery.
World stocks measured by the MSCI All-Country World Index
<.MIWD00000PUS> eased 0.7 percent, and the Thomson Reuters
global stock index <.TRXFLDGLPU> fell 0.6 percent.
CHINESE SIGNALS
The MSCI emerging markets benchmark <.MSCIEF> dropped 1
percent, with China's Shanghai Composite Index <> down 2.9
percent after data showed Chinese import growth below
expectations, pointing to slowing domestic demand and economic
activity.
EPFR Global, which tracks funds domiciled globally with $13
trillion in total assets, said on Monday emerging market equity
and bond funds attracted sizeable inflows during the week ending
Aug. 4 as disappointing U.S. data hinted at a weaker dollar.
In Europe, the FTSEurofirst 300 <> index lost 0.7
percent, led lower by basic resources stocks <.SXPP> following
the Chinese import data.
U.S. stock index futures <SPc1> <DJc1> <NDc1> fell 0.5 to
0.6 percent, indicating softer opening for Wall Street.
Copper <MCU3> fell 2.5 percent and oil prices <CLc1> were
down 1.3 percent to trade below $81 a barrel, on concerns of
less crude purchases by China, the world's second largest energy
consumer.
Yields on benchmark 10-year U.S. Treasuries <US10YT=RR> fell
1 basis point to 2.8180 percent, while those on 10-year German
Bunds <DE10YT=RR> were up 2 basis points at 2.547 percent.
Societe Generale said it was bullish on U.S. Treasuries on
the possibly of more quantitative easing.
"Scaring the market with an early move is a clear drawback,
but acting late to fight the deflation risk would be even more
costly," it said in a note.
"All in all, Treasuries might pull back a touch if the Fed
fails to deliver today, but this will prove to be a buying
opportunity: the QE debate will come back soon anyway unless the
economy or the inflation data quickly turn around."
(Additional reporting by Tamawa Desai; Editing by John
Stonestreet)
