Sawt Falasteen - Stocks drop before expected Fed hike; oil soars on EU embargo

Oil prices meanwhile rebounded sharply after EU chief Ursula von der Leyen said the bloc would impose a gradual ban on Russian crude over Moscow's invasion of Ukraine.

European stocks fell after a broadly downbeat session in Asia, although key bourses including Shanghai and Tokyo remained shut.

The dollar drifted lower versus the euro and yen.

- Trading cautiously -

"Stocks across Europe are trading cautiously ahead of today's Fed announcement," City Index analyst Fiona Cincotta told AFP.

"Stock markets often fall in reaction to rising interest rates because the cost of borrowing becomes more expensive and earnings and growth slows."

The Fed is Wednesday forecast to unveil a half-percentage-point interest rate hike -- its biggest increase since 2000 -- as global central banks race to tame galloping inflation in the wake of the Ukraine war.

The announcement is due one day before the Bank of England is also predicted to deliver a hike.

India's central bank unexpectedly ramped up its key rate by 40 percentage points to 4.4 percent on Wednesday.

Policymakers are seeking to tackle runaway prices -- but risk damaging global economic recovery from the pandemic.

Investor sentiment also remains dogged by fallout from Russia's ongoing Ukraine invasion, which has fuelled bumper gains for many raw materials including crude.

That has in turn sent inflation accelerating to multi-decade highs in nations including Britain and the United States.

Oil jumped almost four percent Wednesday after the latest EU crackdown on Russia, which is a major producer of crude.

"We now propose a ban on Russian oil. This will be a complete import ban on all Russian oil, seaborne and pipeline, crude and refined," von der Leyen told the European Parliament.

But, she added, "we will make sure that we phase out Russian oil in an orderly fashion", with crude banned gradually over the next six months and refined fuels by the end of the year.

The EU executive also proposed sanctioning the head of the Russian Orthodox Church, Patriarch Kirill, and excluding Russian bank Sberbank from the SWIFT network.

- 'EU tightens screw' -

"As the EU tightens the sanctions screw on Russia by bringing in a phased ban on its crude oil, worries about global supply have reared up again," said Susannah Streeter, senior analyst at Hargreaves Lansdown.

"The price of the benchmark Brent scurried up ... to above $108 a barrel after the toughened up stance emerged."

Oil traders were already on tenterhooks before Thursday's gathering of OPEC and other key producers including Russia, who will discuss whether or not to lift output more than expected.

The alliance known as OPEC+ had slashed output in 2020 when oil prices crashed due to the pandemic.

When demand picked up again last year as countries emerged from lockdowns, the coalition began to modestly increase production.

- Key figures at around 1030 GMT -

London - FTSE 100: DOWN 0.6 percent at 7,518.79 points

Frankfurt - DAX: DOWN 0.2 percent at 14,015.37

Paris - CAC 40: DOWN 0.5 percent at 6,442.56

EURO STOXX 50: DOWN 0.5 percent at 3,744.34

Brent North Sea crude: UP 3.7 percent at $108.87 per barrel

West Texas Intermediate: UP 3.7 percent at $106.26 per barrel

Hong Kong - Hang Seng Index: DOWN 1.1 percent at 20,869.52 (close)

Tokyo - Nikkei 225: Closed for a holiday

Shanghai - Composite: Closed for a holiday

New York - Dow: UP 0.2 percent at 33,128.79 (close)

Euro/dollar: UP at $1.0528 from $1.0521 on Tuesday

Pound/dollar: UP at $1.2514 from $1.2499

Euro/pound: DOWN at 84.12 pence from 84.18 pence

Dollar/yen: DOWN at 129.96 yen from 130.14 yen

D.Qudsi--SF-PST