LONDON: Stock markets steadied and the dollar retreated 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.

"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.

A third straight day of record highs for Wall Street's three main indices Tuesday provided little inspiration in the face of long-running fears about surging inflation and the prospect of higher interest rates.

With prices rising at rates 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.

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.

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

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.

Asian markets mixed ahead of Fed as China concerns weigh

Stresses in the country were highlighted Monday when 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 closing of factories again will further flame fears about the recovery outlook.

Key figures around 1100 GMT

London - FTSE 100: DOWN 0.3 percent at 7,251.28 points

Frankfurt - DAX: UP 0.1 percent at 15,971.46

Paris - CAC 40: UP 0.2 percent at 6,942.33

EURO STOXX 50: UP 0.2 percent at 4,304.89

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

New York - Dow: UP 0.4 percent at 36,052.63 (close)

Euro/dollar: UP at $1.1592 from $1.1579 at 2100 GMT Tuesday

Dollar/yen: DOWN at 113.77 from 113.96 yen

Pound/dollar: UP at $1.3652 from $1.3612

Euro/pound: DOWN at 84.87 pence from 85.06 pence

Brent North Sea crude: DOWN 1.9 percent at $83.09 per barrel

West Texas Intermediate: DOWN 2.2 percent at $82.03 per barrel