* FTSEurofirst 300 rises 1 percent; trades above 1,000 mark
* Commodity stocks advance as crude, metals prices rise
* Caution before U.S. Federal Reserve meeting
By Atul Prakash
LONDON, Sept 22 (Reuters) - European equities resumed their upward march on Tuesday after two sessions of losses, with a rebound in crude prices powering energy stocks, but investors remained cautious ahead of a two-day Federal Reserve meeting.
At 0823 GMT, the FTSEurofirst 300 index of top European shares was 1 percent higher at 1,008.74 points after falling 0.7 percent on Monday. It is up 21 percent this year and has surged about 56 percent since hitting a record low in March.
Energy stocks advanced as crude oil climbed above $70 a barrel, bouncing back after its 3 percent decline in the previous session.
BP, Royal Dutch Shell, Tullow Oil, Repsol, Total and StatoilHydro added 1.1-3.2 percent.
British energy firm BG was up 1.9 percent. It is seeking to recover more than $1 billion in oil export duty paid to Kazakhstan, through an international arbitration court, Kazakh Energy Minister Sauat Mynbayev said on Tuesday.
"The fundamental position for all equity markets has just been improving and we know that the central banks, particularly the UK and, importantly, the Federal Reserve, are committed to keep interest rates low for a long period of time," said Mike Lenhoff, chief strategist at Brewin Dolphin.
"It's a very positive feature for the markets. Technically though, it still looks a little overbought."
Financials, which have jumped 170 percent since March lows, were also in demand. Standard Chartered, HSBC, Barclays, Lloyds , Royal Bank of Scotland, BNP Paribas and Societe Generale rose between 0.3 and 1.4 percent.
The VDAX-NEW volatility index, fell 3.8 percent. The lower the index, which is based on sell and buy options on Frankfurt's top-30 stocks, the higher is investor appetite for risky assets, such as stocks.
Across Europe, Britain's FTSE 100 index, Germany's DAX and France's CAC 40 rose 0.9-1.2 percent.
FED MEETING EYED
Investors' focus was on a two-day Fed meeting, starting on Tuesday. The policy-setting U.S. Federal Open Market Committee's (FOMC) decision on interest rates is expected at around 1815 GMT on Wednesday, and economists expect it to hold the target range for overnight interest rates steady at zero to 0.25 percent.
Markets will be looking for any comment indicating the Fed might wind back its unconventional measures given the improving macroeconomic data.
Miners gained ground as key base metals prices advanced. Copper rose 1.4 percent, aluminium gained 0.9 percent and nickel was 2.3 percent higher.
BHP Billiton, Anglo American, Antofagasta, Rio Tinto, Xstrata and Eurasian Natural Resources rose 1.9-3 percent.
Cadbury was up 0.6 percent. The head of the confectioner, which is facing a possible takeover by U.S. food giant Kraft Foods Inc, said there were some "complementary elements" in the two companies' portfolios, according to a Wall Street Journal report.
Still, Cadbury Chief Executive Todd Stitzer, in an interview with the newspaper, said the British company's shareholders still reject the deal at the 9.7 billion pound ($16 billion) price offered by Kraft.
Imperial Tobacco Group, the world's No. 4 cigarette group, rose 0.5 percent, after it said trading remained in line with its expectations while the integration of Altadis was on track.
German building materials maker HeidelbergCement fell 1.1 percent after the company said it had priced shares to be issued in its planned capital increase at 37 euros each. (Editing by Rupert Winchester)