Stg rebounds vs dlr on equities, rate decision awaited

* Sterling up 0.6 percent at $1.4971 <GBP=>

* UK and U.S shares turn positive, lifting sterling

* Record UK construction slump keeps sterling outlook dim

LONDON, Dec 2 (Reuters) - Sterling rose on Tuesday, tracking gains in UK equities to reverse losses as investors covered short positions following a slide in the previous session. Sterling recovered from a early slide to $1.4779, its lowest in more than a week, and clawed back after posting its biggest one-day fall against the greenback since September 1992 on Monday.

The pound benefitted from buying interest after UK shares rose 1.5 percent, while U.S stocks .DJI recovered earlier losses and turned positive, reflecting an easing of extreme risk aversion.

Despite Tuesday's recovery, however, analysts expect sterling to remain on the back foot given the bleak economic outlook for the UK and expectations that the Bank of England will cut interest rates aggressively on Thursday.

"The outlook is overall still negative for sterling. However, most of the bad news has been priced in with a cut in rates being seen by the market to be close to 1 percent," said David Powell, currency strategist at Bank of America in London.

By 1547 GMT, the pound rose 0.6 percent to $1.4971 <GBP=>, while the euro inched up slightly to 85.03 pence <EURGBP=>.  Continued...