Oil slips and equities ease in pre-Fed drift

A look at the day ahead in European and global markets from Tom Westbrook

Oil prices slipped as worries about the demand outlook weighed broadly on commodities, while Asian equities and European stock futures eased in an otherwise quiet session ahead of key central bank decisions in the U.S., Japan and Britain.

Inflation readings in Germany and Spain, which could influence the outlook for euro zone rate moves, and a smattering of earnings fill out the countdown to the week's rate policy events.

Europe also gets preliminary GDP data, although inflation will probably take what room is left on centre stage since markets have all but priced in an ECB rate cut in September and so would be vulnerable to upside surprises on consumer prices.

Oil prices were at a seven-week low, with demand-related worries for now eclipsing concern that war in Gaza is at risk of spreading into Lebanon as tensions rise between Israel and the Iranian-backed Lebanese movement Hezbollah.

The yen took a breather after sharply rebounding over the past two weeks from this month's 38-year low. The currency has been buoyed as investors unwind popular carry trades around the world.

Earnings reports from Microsoft and AMD will be closely watched later on Tuesday, as investors seek clues on appropriate valuations after a recent tech-sector rout.

In Europe, results at BP and Rio Tinto, Airbus and consumer-focused firms such as L'Oreal could give a steer as to economic conditions along the supply chain.

The main events are this week's rate policy meetings, and market moves are likely to be capped until those are out of the way.

After a benign June inflation report, investors bet the Federal Reserve will lay the groundwork for a September rate cut at its policy meeting on Wednesday.

Futures are fully priced for a quarter-point easing and even imply a 10% chance of 50 basis points, and have 66 basis points of easing priced in by Christmas.

Economists polled by Reuters expect the cuts would allow the world economy to keep growing steadily.

The Bank of Japan's policy decision, also on Wednesday, looms over Japanese assets. Sources have told Reuters that a rate hike will be discussed and policymakers may also unveil a plan to roughly halve its bond purchases in the coming years.

Markets price a near 60% chance of a 10 basis point hike, with another 10 basis points expected by year's end.

The Bank of England meets on Thursday with markets pricing a roughly 40% chance of a 25 basis point rate cut.

Key developments that could influence markets on Tuesday:

Economics: Eurozone preliminary GDP, CPI for Germany, Spain and Belgium, U.S. job openings.

Earnings: Airbus, L'Oreal, Rio Tinto, BP, AMD, Microsoft, Starbucks, Archer-Daniels-Midland, Procter & Gamble, Mondelez.

(By Tom Westbrook; Editing by Edmund Klamann)