San Francisco Frontiers - Stocks, dollar retreat before Fed rate decision

The dollar and oil prices also declined.

Equities had been boosted Tuesday by Beijing's pledges of stimulus, particularly the property sector, after a string of readings showed the post-Covid recovery was going off the rails in China.

Focus has returned to central banks' battle to tame inflation, with the Fed tipped to deliver another increase in borrowing costs on Wednesday.

While the result of the meeting is largely accepted, debate is now centred on whether it will announce another hike later in the year.

There had been hopes that this month would see the end of the tightening cycle but data Tuesday showing a key gauge of US consumer sentiment at a two-year high has stoked talk of more to come.

Post-meeting comments by bank chief Jerome Powell will be closely followed for an idea about officials' plans for the rest of the year.

"While Powell will try and make the case for further rate hikes, his time would be better spent in making the case for rates remaining higher for longer, and projecting when the (Fed) expected the two-percent (inflation) target to be met," said CMC Markets analyst Michael Hewson.

After the Fed, attention turns to the European Central Bank, which announces its own rate decision Thursday, followed by the Bank of Japan on Friday.

The Paris stock market fared worse than London and Frankfurt on Wednesday, shedding nearly two percent in afternoon deals.

It was dragged down by luxury group LVMH, whose shares dropped nearly five percent.

"LVMH reported first half results after the European close (Tuesday), and highlighted a weakening trend in US sales," noted Steve Clayton, head of equity funds at Hargreaves Lansdown.

On the upside, shares in Rolls-Royce, the British maker of aircraft engines and other power systems, soared more than 21 percent Wednesday as a turnaround plan under new leadership delivered far better-than-expected results.

- Key figures around 1100 GMT -

London - FTSE 100: DOWN 0.6 percent at 7,648.23 points

Frankfurt - DAX: DOWN 0.7 percent at 16,096.04

Paris - CAC 40: DOWN 1.8 percent at 7,282.72

EURO STOXX 50: DOWN 1.4 percent at 4,330.05

Tokyo - Nikkei 225: FLAT at 32,668.34 (close)

Hong Kong - Hang Seng Index: DOWN 0.4 percent at 19,365.14 (close)

Shanghai - Composite: DOWN 0.3 percent at 3,223.03 (close)

New York - Dow: UP 0.1 percent at 35,438.07 (close)

Euro/dollar: UP at $1.1085 from $1.1058 on Tuesday

Pound/dollar: UP at $1.2921 from $1.2902

Euro/pound: UP at 85.80 pence from 85.68 pence

Dollar/yen: DOWN at 140.37 yen from 140.95 yen

West Texas Intermediate: DOWN 1.0 percent at $78.83 per barrel

Brent North Sea crude: DOWN 0.9 percent at $82.86 per barrel

Q.Taylor--SFF