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LONDON: Stock markets mostly dipped and the dollar steadied Wednesday, with investors biding their time ahead of a hotly-anticipated Federal Reserve announcement on tapering its vast stimulus propping up the economy.

World oil prices sank as concerns about China tempered demand expectations.

Wall Street pulled back modestly at the opening bell after closing at record highs on Tuesday.

Meanwhile in Europe, London was lower, Frankfurt flat, and Paris rose to break a record intra-day high that had stood for 21 years.

"If there is no sign of stress across... markets, it's mostly because we all think we know what will come out from today's (Fed) meeting: a gradual start of the tapering of the bond purchases programme," said SwissQuote analyst Ipek Ozkardeskaya.

With Wall Street racking up a third straight day of record highs on Tuesday, investors were easily able to put aside long-running worries about surging inflation and the prospect of higher interest rates.

"With the major indices at record highs, it can be said that there isn't much fear about the Fed taking away the punch bowl," said market analyst Patrick J. O'Hare at Briefing.com.

"What will be interesting to see is if the stock market keeps charging on the expected outcome or sees it as an opportunity to sell the news following a huge run that has been predicated in part on the belief that the Fed isn't going to raise its policy rate anytime soon," he said.

With inflation surging to levels not seen for years, central banks are being forced to row back the vast financial support put in place at the start of the pandemic, which has been credited with sending equities to records and helping the economic recovery.

While the Fed has clearly signaled it will begin to "taper" or wind down its stimulus programme, investors will be listening for any indication on when it may begin to hike interest rates.

Other central banks have already lifted borrowing costs or started to tighten the purse strings.

The Bank of England is expected Thursday to raise its interest rate for the first time in more than three years to help combat soaring inflation.

But the European Central Bank is "very unlikely" to raise its interest rates even in 2022, president Christine Lagarde said Wednesday.

"Despite the current inflation surge, the outlook for inflation over the medium term remains subdued," Lagarde said in a speech in Lisbon.

In Asia, Hong Kong and Shanghai stock markets were dented again by concerns about China's economy as leaders struggle to contain a new wave of Covid infections.

Hong Kong and Shanghai slipped, with the latest Covid spike in several parts of China forcing some cities into fresh lockdowns that have led to worries about the impact on already strained supply chains in the world's number two economy.

Hong Kong shares begin on back foot

On Monday, the government urged people to stock up on daily necessities and said authorities should take steps to ensure adequate food supplies as containment measures were introduced.

A summer outbreak has been blamed for dragging on growth in the third quarter and the closure of factories will further flame fears about the recovery outlook.

Key figures around 1330 GMT

London - FTSE 100: DOWN 0.4 percent at 7,243.94 points

Frankfurt - DAX: FLAT at 15,951.07

Paris - CAC 40: UP 0.2 percent at 6,941.94

EURO STOXX 50: UP 0.1 percent at 4,302.34

New York - Dow: DOWN 0.2 percent at 35,981.44

Hong Kong - Hang Seng Index: DOWN 0.3 percent at 25,024.75 (close)

Shanghai - Composite: DOWN 0.2 percent at 3,498.54 (close)

Tokyo - Nikkei 225: Closed for a holiday

Euro/dollar: DOWN at $1.1572 from $1.1579 at 2100 GMT Tuesday

Dollar/yen: UP at 113.98 from 113.96 yen

Pound/dollar: UP at $1.3643 from $1.3612

Euro/pound: DOWN at 84.80 pence from 85.06 pence

Brent North Sea crude: DOWN 2.4 percent at $82.69 per barrel

West Texas Intermediate: DOWN 2.8 percent at $81.54 per barrel

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