San Francisco Frontiers - European stocks rise, bucking slides in Asia, US

London, Frankfurt and Paris were all enjoying modest gains as cautious investors awaited an anticipated US Federal Reserve interest rate hike later in the day, as well as a similar decision by the European Central Bank expected on Thursday.

"Caution is set to take centre stage ahead of the Fed's interest rate decision later, as investors mull what's ahead for the mighty US economy," said Susannah Streeter, head of money and markets at stockbroker Hargreaves Lansdown.

Interest rate worries had the opposite effect on Wall Street the day before, conspiring with falling confidence in regional banks to fuel losses that bled over into Asia as Wednesday's trading got under way.

Sydney finished nearly one percent down after the Australian central bank hiked interest rates there to an 11-year high -- a surprise move that dashed hopes it would hold rates steady as inflation showed signs of slowing.

Hong Kong, meanwhile, finished 1.2 percent down, and Seoul, Taipei, Wellington, Jakarta, Singapore, Kuala Lumpur, Mumbai, Bangkok and Manila were all in the red as well.

Markets in Japan and mainland China were closed for holidays.

US futures, meanwhile, were edging back up after the previous day's hefty losses.

Also weighing on investor sentiment were fears that Democrats and Republicans could fail to reach a deal on raising the US debt ceiling, triggering a default by the world's largest economy as early as June 1.

"It is a key event risk in the next few weeks and possibly a month or two," BNY Mellon Investment Management's Aninda Mitra told Bloomberg Television, adding that the impasse "feeds into our overall defensiveness".

Stephen Innes, of SPI Asset Management, said that even if a crisis were averted, it may create a drag on markets.

"As we have seen in the past, a resolution to the debt limit is likely to occur," he said in a note.

"The problem for risk markets is a negotiated deal may include a pullback in government spending that could negatively impact US growth."

Oil prices, meanwhile, sank even lower on Wednesday after tumbling the day before, with the US benchmark oil contract, WTI, briefly dipping under $70 per barrel for the first time since OPEC+ cut output a month ago.

The main international contract, Brent North Sea, was also down, trading under $74 per barrel.

The recent drops have erased gains seen after the OPEC+ production cut was announced at the beginning of April.

"Downward price pressure could persist in oil markets until it becomes clear that a significant recession will be avoided and growth in global oil demand won't be stunted," Innes said.

- Key figures around 0845 GMT -

Hong Kong - Hang Seng Index: DOWN 1.2 percent at 19,699.16

London - FTSE 100: UP 0.2 percent at 7,789.66

Tokyo - Nikkei 225: Closed for holiday

Shanghai - Composite: Closed for holiday

Euro/dollar: UP at $1.1043 from $1.1005 on Tuesday

Pound/dollar: UP at $1.2527 from $1.2470

Dollar/yen: DOWN at 135.71 yen from 136.55 yen

Euro/pound: DOWN at 88.15 pence from 88.23 pence

West Texas Intermediate: DOWN 2.3 percent at $70.13 per barrel

Brent North Sea crude: DOWN 2.1 at $73.76 per barrel

New York - Dow: DOWN 1.1 percent at 33,684.53 (close)

Q.Taylor--SFF