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LONDON  - European shares clung to gains on Tuesday while Wall Street looked set to fall, as investors nervously eyed the spread of the Omicron variant of the coronavirus and sat on the sidelines before numerous central bank decisions due this week.

Despite fears that Omicron is spurring another round of government restrictions that will slow economic growth, stock markets have held up well and rebounded fast - the S&P 500 last week enjoyed its strongest week since early February.

There is plenty for investors to be nervous about as policymakers at the U.S. Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England weigh the pace of interest rate rises needed to curb higher inflation.

But some investors appear happy to 'buy the dip' and move back into stocks, although volumes have also been lower in recent weeks. Many traders are reluctant to take on new positions before year-end after a very strong rally in 2021.

"Everyone has their hands in their pockets at the moment, first because of the major (central bank) events that are coming up and also because most people had a fairly successful year and don't want to blow it at the end of the year," said Colin Asher, Senior Economist at Japanese bank Mizuho.

By 1230 GMT, most early gains in European stocks had fizzled. The EURO STOXX 50 was 0.14% higher. German shares were flat but Britain's FTSE 100 climbed 0.48%. That followed falls across European markets on Monday when a Wall Street selloff hit sentiment.

Wall Street futures were weaker on Tuesday, pointing to a lower open.

Asian shares didn't fare so well. MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.73%, as the Asian Development Bank (ADB) trimmed its growth forecast for developing Asia, reflecting risks brought on by the new virus variant.

China's CSI300 index dropped 0.67%, after health authorities in Tianjin detected the country's first Omicron case.

Hong Kong's Hang Seng Index weakened 1.55%, also dragged down by persistent concerns over the health of China's property sector.

MSCI's gauge of stocks across the globe was unchanged on the day.

ELEVATED VOLATILITY

The Fed is expected on Wednesday to signal a faster wind-down of its monthly $120 billion bond-buying programme to combat accelerating inflation, which could move it one step closer to raising interest rates.

The dollar edged marginally higher ahead of the upcoming meetings.

The dollar index was last at 96.382 while versus the euro it stood $1.1284. The euro is seen as vulnerable given expectations that the Fed will tighten policy faster than the ECB.

"Volatility will remain elevated throughout all of (these) decisions from the Fed, the ECB, and BOE," said Edward Moya, senior analyst at OANDA.

Fears over the Omicron variant of COVID-19 were heightened after British Prime Minister Boris Johnson warned of a "tidal wave" of new cases, and the World Health Organization said it poses a "very high" global risk, with some evidence that it evades vaccine protection.

Oil futures reversed earlier falls as OPEC predicted in its monthly report that the Omicron variant's impact on fuel demand would be mild.

Brent futures rose 0.42% higher at $74.70 a barrel, while U.S. West Texas Intermediate crude increased 0.38%, to $71.57.

Oil prices remain way off levels above $85 a barrel seen in mid-October before the variant was discovered.

The benchmark U.S. 10-year Treasury yield traded 1 basis point higher at 1.437% after falling on Monday as traders positioned for a hawkish Fed. [US/]