* Oil rallies back above $30 a barrel after overnight drop
* European shares edge ahead after bumpy start
* Wall Street seen starting higher, Apple results in focus
* Jitters remain after China shares fall to 14-month low
* Hopes of dovish Fed, BOJ render some support
* Emerging markets bounce, rouble, lira, rand, peso gain
By Marc Jones
LONDON, Jan 26 (Reuters) - Markets went on another rollercoaster ride on Tuesday as hopes that big oil producers may start tightening supply drove crude oil prices higher and pulled stocks out of a worldwide dive that included a six-percent plunge in China.
European shares were flat and Wall Street was expected to start firmer with the focus on a flurry of data and the first Federal Reserve meeting this year.
After the torrid start to the year for markets, economists are keen to see whether Fed policymakers will still be signalling as many as four more rate hikes this year when they emerge from their two-day meeting.
London, Frankfurt and Paris had initially dropped as much as 1.8 percent after the slump in China hit Japan, Hong Kong and the rest of Asia.
The European fight-back from those levels was strongly linked to oil’s recovery from another bout of weakness to climb back above $30 a barrel.
Top OPEC and Russian oil industry officials stepped up vague talk on Monday of possible joint action to remedy one of the worst supply gluts in decades, though there were others, including Kuwait, that say they doubt it will happen as long as others are increasing their output.
“What seems to be behind this is the rebound in oil which has turned around sentiment and we have seen that in equities and Bunds (German government bonds),” Rabobank analyst, Bas Van Geffen, said.
“There was some talk about a March OPEC meeting and if OPEC is going to decide something on the supply side, that is going to be supportive. But we don’t yet know.”
Brent and U.S. crude were last up 1 percent at $30.70 and $30.60 a barrel respectively, having dropped more than 5 percent on Monday.
Other commodity prices including copper, iron ore .IO62-CNI=SI and aluminium rose with it as did oil-linked currencies such as the Russian rouble that had started the day down more than 2 percent.
Markets were by no means in full recovery mode though. Nervousness remained ahead of tech giant Apple’s results following recent noises from suppliers about a sharp drop in iPhone demand.
Bond markets continued to draw in risk-averse investors also. They were paying more than ever for ultra-safe 2-year German government debt and yields on benchmark 10-year U.S. treasuries held below 2 percent ahead of the Fed.
Asia’s turbulent session saw mainland Chinese shares slump more than 6 percent to a 14-month low in another sign that authorities in Beijing have their work cut out in their efforts to stabilise fickle domestic markets.
There was more gloomy data, too, as China’s annual rail freight volume, viewed as a good temperature gauge of the giant economy, fell 11.9 percent last year versus a drop of 3.9 percent in 2014.
The region’s heavyweight indexes, Japan’s Nikkei and Hong Kong’s Hang Seng Index fell 2.4 and 2.5 percent respectively as the first two-day run of gains of the year came to a shuddering halt.
“We are still slightly overweight China, but we are probably going to go neutral,” fund manager Hermes’ head of emerging markets equities, Gary Greenberg, said, citing a possible further 10-percent yuan drop over the next year as one reason.
But as oil and stock markets steadied ahead of U.S. trading, currencies began to turn as well.
The dollar shook off earlier pressure from the safe-haven yen and the low-yielding euro while emerging market players like the rouble, rand, lira and Mexican peso found their feet again.
Investors will be parsing the U.S central bank’s post meeting statement on Wednesday to determine what, if any, effect volatile global markets, plummeting oil prices and heightened fears of a Chinese slowdown have had on the Fed.
U.S. interest rate futures imply markets put the chance of a Fed rate hike this week at just 13 percent. Over the year, they are only expecting one rate hike now, compared to the Fed’s flagged rate path, which factors in at least four.
“There is a fair bit of nervousness going into the Fed meeting. Interest rate markets have postponed rate hikes in 2016 and 2017 so investors expect something dovish from the Fed, given the volatility in stock markets,” Nordea strategist, Niels Christensen, said. (Additional reporting by Anirban Nag in London, Hideyuki Sano in Tokyo, Meeyoung Cho in Seoul; Editing by Louise Ireland)