* Europe shares fall on weak commodities, Asia falls
* BOJ downgrades economy view, Fed begins two-day meeting
* Yen firms vs dollar after BOJ
* Oil falls again as oversupply worries resurface
By Nigel Stephenson
LONDON, March 15 (Reuters) - European shares fell on
Tuesday, pulled lower by mirroring declines in Asia after the
Bank of Japan painted a bleaker picture of the Japanese economy
and helped push the yen higher, and as oil and metals prices
dropped.
U.S. stocks were set to open lower, according to index
futures ESc1 1YMc1 , as investors' focus turned to a two-day
U.S. Federal Reserve policy meeting beginning on Tuesday.
It is likely to signal a slower pace of interest rate hikes
than forecast after the Fed raised the cost of borrowing in
December for the first time in nearly a decade.
The BOJ, like the European Central Bank, has resorted to
negative rates in an effort to spur growth and inflation.
The Fed signalled in its "dot plot" charts of the possible
path of interest rates after its December hike that it could
raise rates four more times this year. Economists say this could
be reduced to three or even two.
Recent data has suggested the U.S. economy is strengthening,
however, with fears of recession much diminished compared with
earlier this year.
"The Fed meeting is important because ... there is a risk of
a hawkish statement," RIA Capital Markets bond strategist Nick
Stamenkovic said. "Investors will wait for the statement and the
dot plots before taking new positions."
The pan-European FTSEurofirst 300 stocks index .FTEU3 fell
1 percent, led lower by commodity-related stocks. The STOXX
Europe 600 Basic Resources index .SXPP was down 4.3 percent.
"There is still a soft demand coupled with excess supply
story in the commodities spectrum," said Lorne Baring, managing
director at B Capital Wealth Management.
Tokyo's Nikkei share index .N225 closed down 0.7 percent
as a stronger yen hurt exporters. MSCI's broadest index of
Asia-Pacific shares outside Japan .MIAPJ0000PUS extended early
losses and were down 1.2 percent.
Chinese shares eked out small gains. The CSI300 index
.CSI300 of the largest listed firms in Shanghai and Shenzhen
rose 0.3 percent and the Shanghai Composite .SSEC 0.2 percent.
The yen strengthened after the BOJ removed from its
post-meeting statement language used after it cut rates in
January that it would lower them further into negative territory
if needed.
The dollar was down 0.7 percent at 113.00 yen JPY= .
"The bias is just in favour of a stronger yen," said Derek
Halpenny, European head of global market research at Bank of
Tokyo Mitsubishi. "On the days when we are 'risk on', the yen
holds strong and on days like today, it gains."
The euro EUR= edged down to $1.1091. Sterling GBP=> fell 1
percent to $1.4160 after a new opinion poll showed supporters of
Britain leaving the European Union were ahead in the run-up to a
June referendum on the issue.
Bookmakers' odds indicate punters believe it is twice as
likely that Britons will vote to remain in the EU.
OIL DROPS
Oil prices, which fell up to 4 percent on Monday, dropped
further after the Organization of the Petroleum Exporting
Countries (OPEC) said it expected lower demand for crude in 2016
than previously thought.
Brent crude LCOc1 last traded down $1 a barrel at $38.53,
raising the possibility that a six-week recovery in oil prices
that has helped buoy stocks markets may be fading.
Euro zone government bond yields, which fell in the previous
two days after the European Central Bank cut interest rates and
expanded its asset-purchase scheme last Thursday, held steady.
U.S. Treasury yields fell as investors squared up positions
before the Fed meeting. Ten-year yields US10YT=RR fell 3 basis
points to 1.93 percent.
Gold XAU= , up around 16 percent this year, held near
two-week lows. It last traded around $1,236 an ounce.