London, May 3- Stock markets dropped on Wednesday, with investors looking ahead to the outcome of the Federal Reserve’s latest interest-rate meeting.
London’s benchmark FTSE 100 index was down 0.3 percent heading into midday trading.
In the eurozone, Frankfurt’s DAX 30 shed 0.1 percent. On Tuesday, the index surpassed 12,500 for the first time.
The Federal Reserve opened its two-day policy meeting on Tuesday amid signs of softening US inflation which eases the pressure to raise interest rates, at least for now.
The central bank is not expected to move the benchmark lending rate Wednesday from the current target range of 0.75 percent to one percent.
Most economists say the Fed likely will stay the course and hike interest rates twice more this year, probably in June and September, despite a weak batch of economic indicators since it last raised rates in March.
Ahead of the meeting, investors were digesting earnings updates from a number of leading European companies.
In Germany, Volkswagen confirmed its forecasts for 2017 after boosting revenue and profits in the first quarter, even as its emissions cheating scandal continues to make headlines.
Its shares were down 1.0 percent at 143 euros in early afternoon deals.
– ‘No chance’ of rate hike –
With Tokyo, Hong Kong and Seoul all closed for public holidays business was thin across Asia, despite another record close for the Nasdaq on Wall Street, as traders await cues from the Fed.
“With the big slip in data recently there is no chance they raise rates, but the (post-meeting) statement could contain a discussion about the balance sheet taper (which) so many Fed speakers have been talking about recently,” said Greg McKenna, chief market strategist at AxiTrader.
Minutes from the bank’s March meeting showed the policy board was considering tightening monetary policy by sucking cash out of the financial system, a disclosure which spooked investors early last month.
Friday sees the next key event when the US government releases jobs creation figures for April, which will be used by the Fed to gauge when it will next raise borrowing costs.
In Asia on Wednesday, Shanghai reversed early gains to end down 0.3 percent, Sydney sank one percent and Wellington was 0.2 percent off, while Manila and Jakarta also retreated.
Singapore added 0.8 percent and Taipei was slightly higher.
Overnight on Wall Street, the Nasdaq posted another record while the Dow and S&P 500 also punched higher.
On foreign exchange markets, the euro was down against the dollar ahead of Sunday’s second round of France’s presidential election, in which moderate Emmanuel Macron is expected to beat his far-right, anti-EU opponent Marine Le Pen.
Crude prices staged a minor recovery after both contracts tumbled more than two percent Tuesday on news that US production was rising and Libya had ramped up output.
The news offset a drop in inventories and hopes for an extension of cuts by the OPEC cartel.
– Key figures at 1045 GMT –
London – FTSE 100: DOWN 0.3 percent at 7,229.11 points
Frankfurt – DAX 30: DOWN 0.1 percent at 12,492.38
Paris – CAC 40: DOWN 0.2 percent at 5,292.07
EURO STOXX 50: FLAT at 3,578.05
Shanghai – Composite: DOWN 0.3 percent at 3,135.35 (close)
Tokyo – Nikkei 225: Closed for holiday
Hong Kong – Hang Seng: Closed for holiday
New York – Dow: UP 0.2 percent at 20,949.89 (close)
Euro/dollar: DOWN at $1.0910 from $1.0925 at 2050 GMT
Pound/dollar: DOWN at $1.2918 from $1.2932
Dollar/yen: UP at 112.2 yen from 112.04 yen
Oil – Brent North Sea: UP 32 cents at $50.78 per barrel
Oil – West Texas Intermediate: UP 28 cents at $47.94