*

Nikkei flat, Wall St futures fractionally firmer

*

China stocks gain as Nov exports top forecasts

*

Fed expected to deliver hawkish rate cut on Wednesday

*

Rates set to stay on hold in Canada, Switzerland,

Australia

(Adds China military exercise, Thai conflict with Cambodia)

By Wayne Cole

SYDNEY, Dec 8 (Reuters) - Share and bond markets seemed

guardedly optimistic on Monday that the Federal Reserve would

deliver a much-needed rate cut this week, though the meeting

looks set to be one of the most fractious in recent memory.

Futures imply around an 86% chance of a quarter-point

reduction in the 3.75% to 4.0% funds rate, so a steady decision

would be a seismic shock. A Reuters poll of 108 analysts found

only 19 tipping no change, and the rest a cut.

"We expect at least two dissents in favour of no action and

that only a slim majority of the 19 Fed participants will

indicate in their updated dots that a December cut was

appropriate," wrote Michael Feroli, head of U.S. economics at

JPMorgan, in a note.

The Federal Open Market Committee has not had three or more

dissents at a meeting since 2019, and that has happened just

nine times since 1990.

Feroli also thinks the Fed will cut in January as insurance

against a sustained weakening in the labour market, before going

on a lengthy policy pause. Markets currently see only a 24%

chance of a January move and a further easing is not fully

priced until July.

Central banks in Canada, Switzerland and Australia also meet

this week and all are poised to hold steady. The Swiss National

Bank might like to ease again to offset the strength of its

franc, but is already at 0% and reluctant to go negative.

A run of hot economic data has led markets to abandon any

hope of another easing from the Reserve Bank of Australia and

even price in a rate hike for late 2026.

Hopes for more Fed stimulus have helped support equities in

recent weeks, and both S&P 500 futures and Nasdaq futures

were 0.2% firmer in Asian trade.

Earnings this week from Oracle and Broadcom

will test the appetite for all things AI-related,

while Costco will provide colour on consumer demand.

BONDS HAVE A LOT RIDING ON FED GUIDANCE

In Asia, Japan's Nikkei went flat, after making a

modest 0.5% gain last week. South Korean stocks added

0.8%, having jumped 4.4% last week on confirmation of a lower

U.S. tariff on its exports.

MSCI's broadest index of Asia-Pacific shares outside Japan

firmed 0.1%.

Chinese blue chips gained 1.0% as data showed the

country's exports rose 5.9% in November, topping forecasts of

3.8% and staying resilient in the face of U.S. tariffs. Imports

missed modestly with a rise of 1.9%, suggesting domestic demand

remained subdued overall.

Beijing's diplomatic spat with Tokyo worsened as a Chinese

carrier strike group launched intense air operations near Japan

over the weekend. Elsewhere in the region, Thailand launched air

strikes along its disputed border with Cambodia.

In Europe, EUROSTOXX 50 futures and FTSE futures

edged down 0.1%, while DAX futures were little

changed.

In bond markets, longer-dated Treasuries have been under

pressure given the risk of hawkish guidance from the Fed, even

if it does agree on a cut this week.

There are also concerns President Donald Trump's attacks on

Fed independence could lead to rates going too low and stoking

inflation over the long run.

On Monday, 10-year yields were steady at

4.142%, having climbed 9 basis points last week.

The rise in yields had helped the dollar steady after two

weeks of decline, though its index was now off 0.1% at 98.876

.

It slipped 0.2% on the yen to 154.99, with markets

increasingly confident the Bank of Japan will raise its rates at

a policy meeting next week.

The euro was a shade firmer at $1.1654, just short

of its recent seven-week high of $1.1682.

Commodities have been generally underpinned by wagers on

more U.S. policy stimulus, with copper reaching all-time highs

thanks to a mixture of supply concerns and demand from

AI-related infrastructure investment.

Gold stood at $4,210 an ounce, after spiking as high

as $4,259 on Friday, while silver was just off a lifetime

peak.

Oil prices were also supported by the chance of lower

interest rates, combined with geopolitical uncertainty that

could limit supplies from Russia and Venezuela.

Brent added 0.1% to $63.84 a barrel, while U.S.

crude rose 0.2% to $60.17 per barrel.

(Reporting by Wayne Cole; Editing by Saad Sayeed and

Muralikumar Anantharaman)