LONDON — Stocks mostly drifted lower on Wednesday as global traders cautiously awaited the outcome of the US Federal Reserve's (Fed’s) policy meeting for any comment on the inflation outlook.

 

The dollar was mixed as the US central bank wraps up a two-day policy meeting.

 

Fed chair Jerome Powell may use his news conference later on Wednesday to allay market worries about a possible surge in prices as the economy recovers.

 

With market attention focused on the US central bank, "investors are treading water ahead of a delicately poised Federal Reserve announcement", noted Richard Hunter, head of markets at Interactive Investor.

 

"Its previous assertion that the current inflation effect is transitory will need to be reiterated in order to avoid further uncertainty in the bond markets while for equities, any hint of a rise in interest rates earlier than expected would be unsettling."

 

US benchmark 10-year Treasury yields — a guide to future interest rates — have risen to a one-year high in recent weeks, with anxiety about higher inflation further stirred by Washington's $1.9 trillion stimulus package.

 

On Wall Street, the Dow began trading nearly unchanged, while the S&P 500 shed 0.4 per cent and the tech-heavy gave up 1 per cent as Treasury yields climbed further.

 

Analysts at Charles Schwab brokerage said investors are "fence-sitting ahead of this afternoon's monetary policy decision from the Federal Reserve".

 

In European trading, Frankfurt was flat, while Paris dipped 0.1 per cent. London shed 0.6 per cent.

 

Traders said there were continuing concerns over AstraZeneca's COVID vaccine shot which many EU countries have suspended pending results of a probe into several blood clot incidents.

 

In a newspaper article on Wednesday, the UK's health minister said the jab was safe and there was no evidence of a health risk.

 

Meanwhile, oil prices dropped by around 1 per cent after recent strong gains.

 

Oil markets and the world economy are recovering from the massive collapse in demand caused by the coronavirus pandemic, the International Energy Agency said in a report on Wednesday.