GLOBAL MARKETS-Silver slide ripples out, Fed in focus

                                
 * Silver slides, helps pull down gold and oil
                                
 * European stocks edge up, miners lose out
                                
 * Euro rebounds, Fed expected to lag ECB on rates
                                
 
                                
 By Mike Peacock
                                
 LONDON, April 26 (Reuters) - Silver tumbled before finding a
footing on Tuesday, dragging prices of gold and oil with it and
subduing European shares, although investors were wary of taking
strong positions ahead of a U.S. Federal Reserve policy meeting.
                                
 Spot silver prices exploded on Monday, soaring to within 17
cents of a 1980 record high as options sellers bought when key
strike levels at $45 and $50 came under threat of exercise.
                                
 U.S. silver futures <SIcv1> tumbled as much as 5.4 percent
to $44.61 an ounce on Tuesday, before clawing back some lost
ground to $46 by 0745 GMT.
                                
 The drop in silver, triggered by an options expiry later in
the day, spread to gold and oil. U.S. crude futures shed more
than a $1 after Saudi Aramco's chief executive said the kingdom
was not comfortable with current oil prices. [O/R]
                                
 Spot gold <XAU=> fell 0.6 percent to $1,499.60 an ounce,
after a seven-day record-setting rally that pushed prices to
$1,518.10 on Monday. [GOL/]
                                
 The impact from falling metals also spread to European
shares <.FTEU3>, with mining companies taking a modest hit.
                                
 After a four-day Easter break, the FTSEurofirst 300 index of
top European shares was up 0.2 percent at 1,145.24. Traders said
risk appetite was shrivelling ahead of a Federal Reserve meeting
eyed for signs on the future of its ultra-loose monetary policy.
                                
 "There are concerns that the Fed's loose monetary policy is
going to lead to inflation. Investors are cautious ahead of the
meeting," said Koen De Leus, strategist at KBC Securities, in
Brussels.
                                
 Japan's Nikkei average <.N225> closed at a one-week low,
losing 1.2 percent as exporters were hit by a stronger yen.
                                
 World stocks as measured by the MSCI All-Country World Index
<.MIWD00000PUS> were barely changed at 350.30.
                                
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 For a PDF on gold,          http://link.reuters.com/xuk29r
                                
 GRAPHIC on silver and gold:    http://r.reuters.com/xup29r
                                
 Fed QE timelines:              http://r.reuters.com/faq98r
                                
 GRAPHICS package:              http://r.reuters.com/buv87r
                                
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 FED FOCUS
                                
 Investors are already transfixed by the Federal Reserve's
meeting, which kicks off later on Tuesday, particularly since
after its decision on Wednesday Ben Bernanke will give the first
scheduled news briefing by a Fed chief in the bank's 97-year
history. [ID:nN20193559]
                                
 The euro recovered against the dollar, helped by demand from
sovereign investors, with expectations the Fed will keep policy
accommodative likely to see it hover near recent peaks. [FRX/]
                                
 The euro <EUR=> was up 0.1 percent at $1.4595, not far from
a 16-month high of $1.4649 hit last week. It gained from a
session low of around $1.4494 on steady buying by Middle East
investors and Asian central banks, traders said.
                                
 "Any rise in the dollar is a good opportunity to sell it
since it should remain weak unless the Fed signals it wants to
tighten monetary policy," said Adam Myers, senior forex
strategist at Credit Agricole. "We do not see Bernanke doing
that tomorrow."
                                
 While the Fed is still in the process of buying bonds with
newly-printed money and not expected to tighten policy soon, the
European Central Bank raised rates from a record low to 1.25
percent earlier this month and is expected to repeat the move
before long.
                                
 Europe's single currency also remains prey to developments
in the bloc's debt crisis.
                                
 Investors will watch Spain's sale of three- and six-month
Treasury bills for signs of weakness after peripheral debt came
under pressure across the board last week on growing talk that
Greece would restructure its public debt. [ID:nLDE73O0BA]
                                
 "The contagion effect we saw last week is, I think, going to
be short-lived. Spain should be treated differently to the other
three peripherals (Greece, Ireland and Portugal)," said Nick
Stamenkovic, strategist at RIA Capital Markets.
                                
 "But the market is still very nervous about Greece so it's
still very difficult to see any significant decline in yields
there any time soon."
                                
 The premium investors demand to hold Greek government bonds
rather than benchmark German Bunds rose to a new euro-era high as
investors continued to price in a restructuring of its debt.
                                
 Greek credit default swaps also rose sharply to 1,340 bps,
up 37 bps versus Monday's New York closing level. [GVD/EUR]
                                
 (Editing by Patrick Graham)