March 29, 2017 / 8:03 AM / 5 months ago

GLOBAL MARKETS-Stocks up, formal Brexit start casts shadow over sterling

* Formal Brexit process begins

* Sterling under pressure

* Stocks regain footing

By Jamie McGeever

LONDON, March 29 (Reuters) - European shares rose on Wednesday, following Wall Street's late surge, while sterling was the biggest loser on major currency markets ahead of the formal triggering of Britain's exit process from the European Union later in the day.

Prime Minister Theresa May will notify EU Council President Donald Tusk in a letter that Britain really is quitting the bloc it joined in 1973, pitching the United Kingdom into the unknown and triggering years of uncertain negotiations.

The start of the formal Brexit process comes a day after the Scottish Parliament backed a bid to hold a second independence referendum that would break up the UK, adding another layer of uncertainty for investors to navigate.

"Details are everything now. We could be in for a rough ride today as currency traders react to the contents of the letter being delivered to Brussels and the language May uses in parliament," said Neil Wilson, senior market analyst at ETX Capital.

"A truly hard Brexit has not been priced into sterling. We could see it move lower still if negotiations take a sour turn," he said.

Sterling hit a one-week low of $1.2378 and was last trading down 0.5 percent against the dollar at $1.2390.

Elsewhere in currencies, the euro was down a quarter of one percent at $1.0785 and the dollar was flat against the yen at 111.05 yen.

The dollar bounced from 4-month lows as a top Federal Reserve official talked of more rate hikes to come. Fed Vice Chairman Stanley Fischer, one of the more influential policymakers with markets, said two more rate increases this year seemed "about right".

WALL STREET RECOVERY

In stocks the leading index of 300 European shares was up 0.2 percent at 1,490 points and Germany's DAX was up 0.6 percent, mostly driven by broker upgrades and results.

MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.2 percent and back toward recent 21-month peaks, while Japan's Nikkei added 0.1 percent.

The Dow Jones snapped an eight-day losing streak on Tuesday, its longest run of losses since 2011, in part as a survey showed consumer confidence surged to a more than 16-year high.

In early European trading on Wednesday, S&P 500 futures pointed to a 0.2 percent rise on Wall Street.

"Economic fundamentals still remain exceedingly sound here in 2017 and you do not need Trump's pro-growth fiscal agenda for this to be one of the best years for growth since the recovery started," argued Tom Porcelli, chief U.S. economist at RBC Capital Markets.

"We still think tax reform happens, but you are better off thinking about the timing as an end of year event at best."

In commodity markets, base metal prices bounced on more upbeat economic news from China with copper gaining 0.8 percent overnight to add to Tuesday's 2 percent rise.

Oil prices gained after a severe disruption to Libyan oil supplies and as officials suggested the Organization of the Petroleum Exporting Countries and other producers could extend output cuts to the end of the year.

U.S. crude CLc1 added 1 percent to $48.83 a barrel, while Brent also rose 1 percent to $51.80.

Spot gold was little changed at $1,250 an ounce.

Reporting by Jamie McGeever; Additional reporting by Wayne Cole in Sydney; Editing by Alison Williams

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