(Updates prices)

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Oil prices hover at two-week highs

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Investors eyeing more consumption-led stimulus from China

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U.S. futures slide on recession worries

By Rae Wee and Amanda Cooper

SINGAPORE/LONDON, March 17 (Reuters) - Oil hit two-week

highs on Monday and European shares climbed while U.S. futures

slid as investors braced for more of the trade policy bombshells

that have created a sharp divergence between the performance of

U.S. markets and those elsewhere.

The week is packed with central bank meetings, including the

Federal Reserve, the Bank of Japan and the Bank of England, all

of which are widely expected to hold fire, as policymakers try

to see through the current economic uncertainty.

Over the weekend the U.S. defense secretary said the country

would continue attacking Yemen's Houthis until they ended

attacks on shipping, which drove up oil prices on Monday as

investors worried about possible disruptions to supply.

Oil prices rallied almost 1.5%, even though the

prospect of an imminent end to the Ukraine war might bring more

Russian energy supplies back to Western markets.

U.S. President Donald Trump said he plans to speak to

Russian President Vladimir Putin on Tuesday and discuss ending

the war in Ukraine, after positive talks between U.S. and

Russian officials in Moscow.

Brent futures were last up 1.4% at $71.54 a barrel,

while U.S. crude also rose 1.4% to $68.12 a barrel.

Shares in Europe rose on Monday, trading comfortably above

last week's multi-week lows. The STOXX 600 was up 0.4%

on the day, bringing gains for the year to 7.6%, in stark

contrast to the S&P 500, which last week entered

correction territory, with a year-to-date loss of 4.3%.

European stocks and the euro have rallied sharply this

month, driven in large part by Germany's plan to overhaul its

fiscal policy that includes a 500-billion euro ($540 billion)

fund for infrastructure and changes to borrowing rules.

Germany's parliamentary budget committee on Sunday approved

the bill, which will be voted upon in the lower house of

parliament on Tuesday and by the upper house on Friday.

The euro traded near five-month highs and was last

up 0.1% on the day at $1.0897.

"The idea of Germany's fiscal loosening being more in the

(euro)'s price will be assessed on Tuesday when the Bundestag

votes on the package. It would be very (euro) negative if it

fails to pass," said Paul Mackel, global head of FX research at

HSBC.

In China, data on Monday showed retail sales growth

quickened in January-February, while a series of new policy

measure from Chinese authorities to boost domestic consumption

had little impact on local stocks or the yuan itself, which was

steady in the offshore market at 7.2409.

Chinese equities rose 0.2%, while South Korean

and Japanese stocks gained 1.7% and 0.93%,

respectively.

U.S. DRUBBING

While Asia stocks started the week on a strong note, over in

the United States, futures pointed to a downbeat start on Wall

Street.

Stocks officially entered correction territory last week,

battered by tumbling consumer confidence and general pessimism

over the economy, as Trump's erratic approach to trade policy

has dented sentiment.

European and Chinese equities in particular have been major

beneficiaries of U.S. market weakness, as investors move from

believing in "TINA" - There is No Alternative to U.S. assets -

to "TIARA" - There Is A Real Alternative - according to Andy

Wong, a senior Hong Kong-based executive at Pictet Asset

Management.

Futures on the S&P and the Nasdaq fell around

0.2% in the premarket.

U.S. Treasury Secretary Scott Bessent said in an interview

that aired on Sunday there are "no guarantees" there will not be

a U.S. recession, adding to investor worries of an impending

economic downturn.

"I still find it tough to advocate for anything other than

selling rallies at this moment in time, and remain bearish in

the short-term," Pepperstone strategist Michael Brown said.

"There is scant sign of the current degree of policy

uncertainty lifting any time soon," he said.

Against a basket of currencies, the dollar held near a

five-month low at 103.55, bringing losses this year to

over 4%, as investors have slashed their bullish bets.

The yen edged up, leaving the dollar down 0.1% on

the day at 148.45, ahead of the BOJ's meeting this week where it

is expected to keep rates on hold, though most economists expect

further policy tightening later this year.

Elsewhere, gold held just below $3,000 an ounce,

having broken through that point for the first time on Friday.