Markets are waiting on the Fed as it looks to support the US economy in the absence of political agreement on a stimulus package

London (AFP) - Investors trod a cautious path with their immediate focus on the Federal Reserve’s latest meeting Wednesday as world stocks moved in a tight range while the pound moved higher on hopes of an end to a Brexit impasse.

The dollar was down against its main rivals awaiting news from the US central bank due at 1800 GMT.

But the British pound in contrast gained ground after Prime Minister Boris Johnson said he was confident Britain and the EU will avoid a cliff-edge “no deal” at the end of this year.

“It’s not what this country wants (no deal) and it’s not what our EU friends and partners want from us. Therefore I have every hope and expectation that that will not be the outcome,” Johnson told MPs as the British currency added more than a cent to $1.2991.

But the rise weighed on the FTSE 100 index which gave up almost half a percent.

“It’s been a fairly lacklustre session for European stocks, with little in the way of news flow to pique the interest of investors, with the FTSE 100 sliding back as the pound heads back towards the 1.3000 area against the US dollar,” noted Michael Hewson, chief market analyst with CMC Markets.

London stocks had initially slid slightly as investors nervously eyed news that British inflation hit a near five-year low at 0.2 percent in August on state stimulus measures for the virus-hit hospitality sector.

- Oil on rise -

Oil prices made solid gains of more than three percent awaiting data on Hurricane Sally-hit crude stockpile levels in the United States, an indicator of demand in the world’s biggest economy.

“Among OPEC members, there is increasing awareness of a deteriorating demand outlook,” said Edoardo Campanella, economist with UniCredit Bank, noting the “uncertain path” of the virus.

Wall Street was boasting a modest gain of around 0.8 percent two hours into the session while the tech-heavy Nasdaq edged into the red.

Frankfurt and Paris stock markets barely inched forward, meanwhile, after the Organisation for Economic Co-operation and Development cautioned that the pandemic-induced global recession will not be as deep as expected due to countries’ efforts to contain economic fallout from Covid-19.

- ‘Keeping powder dry’ -

“Investors may be keeping their powder dry ahead of the latest meeting of the US Federal Reserve with the central bank widely expected to hold rates near zero,” noted Russ Mould, investment director at online broker AJ Bell.

Global markets have enjoyed something of a respite from the roller-coaster ride seen earlier in the month, which saw a rout of previously surging technology firms, as vaccine hopes and upbeat economic data offset worries about fresh virus spikes and new containment measures.

With US lawmakers unable to agree on a new stimulus package – despite the first running out last month, leaving millions of Americans struggling – the onus has fallen on the US central bank to do much of the leg work in supporting the world’s top economy.

While officials are not expected to unveil any fresh measures, having already indicated they will keep interest rates near zero for the foreseeable future, boss Jerome Powell’s post-meeting comments will be pored over for an idea about the outlook and clues to future policy.

- Key figures around 1545 GMT -

New York - Dow Jones: UP 0.8 percent at 28,211.80

London - FTSE 100: DOWN 0.4 percent at 6,078.48 points (close)

Frankfurt - DAX 30: UP 0.3 percent at 13,255.37 (close)

Paris - CAC 40: UP 0.1 percent at 5,074.42 (close)

EURO STOXX 50: DOWN 0.1 percent at 3,328.55

Tokyo - Nikkei 225: UP 0.1 percent at 23,475.53 (close)

Hong Kong - Hang Seng: FLAT at 24,725.63 (close)

Shanghai - Composite: DOWN 0.4 percent at 3,283.92 (close)

Euro/dollar: DOWN at $1.1840 from $1.1847 at 2100 GMT

Pound/dollar: UP at $1.2991 from $1.2886

Euro/pound: UP at 91.13 pence from 90.61 pence

Dollar/yen: DOWN at 104.89 yen from 105.78 yen

West Texas Intermediate: UP 3.6 percent at $39.86 per barrel

Brent North Sea crude: UP 3.4 percent at $41.95 per barrel