World stocks stutter before Fed decision

LONDON — Global stock markets struggled on Wednesday ahead of a US Federal Reserve (Fed) policy decision as investors lost their appetite for risk that had fuelled a recent rally as coronavirus lockdowns eased.

Europe jumped out of the blocks at the open, but swiftly fell back as caution prevailed before the conclusion of the Fed's latest monetary policy gathering.

Earlier, Asia had already turned in a subdued performance.

Wall Street was also on tip toes as nervous punters tried to guess the US central bank's next moves.

'Pivotal' 

The meeting "could well be pivotal in deciding whether markets continue to rally", said Scope Markets analyst James Hughes.

"The Fed has thrown an unprecedented amount of stimulus at the US economy over the last three months, and what Chairman Jerome Powell says will impact the direction of global markets."

Most observers did not expect any rate easing after the Fed pledged vast sums of cash as a backstop to financial markets, but some action was likely.

"The Fed orchestrated this market recovery, and [is] now set to offer its latest thoughts, estimates and, hopefully for market sentiment, an actionable go-forward plan," said AxiCorp's Stephen Innes.

While many expect the Fed to add ammunition to its anti-virus efforts, some believe the central bank could take a step back as some signs are pointing towards a rapid recovery, including a blockbuster US jobs report last week.

'Sell-off' 

"There is a risk we may see a pronounced sell-off in risk assets if the Fed turns out to be not as dovish as expected," cautioned Fawad Razaqzada, an analyst at ThinkMarkets.

Any Fed decision to phase out its quantitative easing stimulus programme could be the trigger for stock market weakness, but also for dollar strength, he said.

In recent weeks, global markets had fizzed higher on the back of economic recovery hopes.