Global stock markets diverged on Wednesday, with Asia rising and Europe falling before an expected interest rate hike from the Federal Reserve, with inflation around the highest levels in decades despite moderate slowdowns.
London losses nearing the half-way mark were cushioned by news that UK inflation nudged lower in November.
Frankfurt and Paris also fell despite the Ifo research institute's forecast that Germany's recession could be milder than previously predicted.
Asian indices closed higher following Tuesday's softer-than-expected US inflation data that could allow the Federal Reserve to slow its pace of interest rate hikes.
The Fed is forecast to increase borrowing costs 50 basis points on Wednesday after four 75-point rises in a row.
The US central bank's post-meeting statement and boss Jerome Powell's comments are the main focus for traders, along with the Fed's infamous "dot plot" chart of the rate outlook.
"At the end of the day, it's Jerome Powell, and the Fed, who will either give a green light for a modest Santa rally (for equities), or tell investors that Santa is stuck in a snowstorm this year," noted SwissQuote analyst Ipek Ozkardeskaya.
It's Jerome Powell, and the Fed, who will either give a green light for a modest Santa rally (for equities), or tell investors that Santa is stuck in a snowstorm this year- SwissQuote analyst Ipek Ozkardeskaya
It's the turn of Europe on Thursday, with the Bank of England and European Central Bank expected to announce less aggressive rate hikes compared with their recent monetary policy decisions.
Wall Street rebounded on Tuesday in reaction to data showing US consumer prices rose 7.1 per cent last month, less than forecast and the slowest pace since December 2021.
The reading followed an October slowdown and fuelled hopes that inflation in the world's biggest economy has finally peaked, after several months of Fed rate hikes.
Markets are also eyeing developments in China, which is continuing to roll back its strict zero-COVID strategy that has battered the world's number two economy, though fears of a sharp surge in infections are causing some unease among dealers.
Oil extended recent gains as traders awaited the weekly US inventories report for clues on demand in the world's top crude-consuming nation.