* Stocks stay on track for best week in eight
* Fed rate decision next week hangs in the balance
* "Quite a fragile time" - equity fund manager
By Jamie McGeever
LONDON, Sept 11 (Reuters) - Global stocks around the world
slipped into the red on Friday but remained on track for their
biggest weekly gain in eight as investors grappled with the
possibility of U.S. interest rates rising next week.
While next Thursday's eagerly anticipated decision from the
Federal Reserve hangs very much in the balance, meaning the
potential for market volatility remains high, stocks and
government bond yields have moved higher this week.
Reflecting the growing uncertainty as the big day
approaches, however, the dollar slipped on Friday and was on
track for a fall of nearly 1 percent on the week, its first
weekly decline in three.
"We're going through quite a fragile time, and we'll have to
see how it evolves from here. That will depend on Fed action, as
well as whether there's further negative news from China," said
Veronika Pechlaner, European equity fund manager at Ashburton.
"This is not the time to make huge bets either way, but
longer term we remain constructive on equities."
In early trading on Friday European shares were lower. The
FTSEuroFirst index of leading 300 shares was down 0.5 percent at
1,408 points .FTEU3 , but still up more than 1 percent on the
week, its best performance since mid-July.
Britain's FTSE 100 .FTSE was down 0.2 percent at 6,139
points, Germany's DAX .GDAXI was down 0.5 percent at 10,161
points and France's CAC 40 .FCHI was off 0.3 percent at 4,582
points.
U.S. stock futures ESc1 slipped 0.2 percent, suggesting a
slightly weaker opening on Wall Street. The S&P 500 has bounced
back from last week's 3.4 percent fall, however, and is well on
track for its best week since July.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS slipped 0.1 percent, but was on for a rise of
more than 2.5 percent on the week, its biggest weekly gain in
five months.
Chinese shares ended another choppy week little changed on
Friday. The Shanghai Composite Index .SSEC rose 1.2 percent on
the week, a welcome relief for investors after it had lost
around 20 percent in the preceding three.
Chinese industrial output, retail sales and investment data
on Sunday will give clues on whether the world's second-largest
economy is continuing to lose momentum and help set the tone for
markets next week. ECONCN
YUAN FIRMS, DOLLAR STEADIES
U.S. data on Thursday suggested the labour market was
gaining momentum in early September as fewer Americans filed for
weekly unemployment benefits. But a separate report showed weak
inflation, further clouding the outlook for what the Fed will
decide to do at its Sept. 16-17 policy meeting. ID:nL1N11G0UZ
Considering volatile global equities, increasing uncertainty
over China and emerging markets, and other major central banks
around the world easing policy rather than tightening, it could
be a high bar for the Fed to raise rates next week.
"Our analysis suggests that the recent tightening in
financial conditions, if maintained going forward, would be
equivalent to around three (rate) hikes," Goldman Sachs (NYSE:GS) U.S.
economists wrote in a note to clients.
"Given that markets have done much of the Fed's 'dirty
work', we expect Fed officials to be on hold at least until
December."
In currencies the dollar was flat against the yen at 120.50
JPY= and the euro was up 0.2 percent at $1.1300 EUR= ,
meaning the dollar's trade-weighted index was down slightly at
95.40 .DXY .
The benchmark 10-year U.S. Treasury yield was down a basis
point on the day at 2.21 percent US10YT=RR , but up 8 basis
points so far this week.
The two-year yield, which is more sensitive to interest rate
moves and expectations, was flat on the day at 0.735 percent
US2YT=RR but up slightly on the week. On Wednesday, it hit a
three-month high of 0.766 percent.
In commodities, U.S. crude oil futures gave back some of
their overnight gains after top exporter Saudi Arabia said it
saw no need for a producer summit to defend prices. O/R
U.S. crude CLc1 was down 2 percent at $45.00 a barrel,
after rallying 4 percent earlier on U.S. Energy Information
Administration data that showed strong demand for gasoline.
Brent LCOc1 , which gained 2.8 percent in the previous
session, was down nearly 2 percent at $48.00.
Spot gold XAU= edged down to $1,108 an ounce, on track to
drop more than 1 percent for the week, its third straight weekly
fall.