European stocks diverge before UK budget, Fed

French and German stocks sank Wednesday in cautious deals before a US interest rate decision, but London rose ahead of Britain's latest annual budget.

Frankfurt's DAX 30 index fell 1.16 percent to 11,841 points, the CAC 40 in Paris dropped 0.45 percent to 5,006.20 points and Milan's FTSE MIB shed 1.18 percent to 11,851 points.

On the upside, London's benchmark FTSE 100 index of top companies rose 0.61 percent 6,879.50 points in late morning deals in the capital.

The euro climbed to $1.0624 from $1.0590 late in New York on Tuesday. The European single currency continued its recovery after falling on Monday to $1.0458 -- the lowest level for more than 12 years.

British finance minister George Osborne will deliver his coalition government's annual budget at 1230 GMT, ahead of a looming general election on May 7.

Later on Wednesday, the US Federal Reserve's decision-making Federal Open Market Committee (FOMC) will wrap up a two-day policy meeting.

"With the pre-election budget out today and the FOMC rate decision, we can expect to see a choppy day," said trader Farhan Ahmad at broker Tradenext.

"The Chancellor has already promised that there will be no budget giveaways but with several budget issues leaked to the press already, it seems that Mr Osborne is all too aware that this is an important chance to woo voters."

London's energy sector rallied amid speculation that Osborne will unveil help for offshore oil and gas companies, whose operations have been hit by slumping global oil prices.

Anglo-Dutch energy group Royal Dutch Shell's 'A' shares soared 1.67 percent to 2,008 pence, British peer BP added 1.36 percent to 431.70 pence and Tullow Oil gained 0.87 percent to 301 pence.

Elsewhere, Asian markets mostly advanced Wednesday as investors await the end of the Fed's policy meeting later in the day, hoping for clues about its plans for the future path of interest rates.

- Fed 'patient' removal -

Many Fed watchers anticipate the FOMC will delete its reference to being "patient" -- used in the December and January statements -- about raising near-zero rates in its latest post-meeting statement.

"Ever since the Fed first announced that it would begin tapering its asset purchases back at the end of 2013, market participants have been trying to predict when the first rate hike would follow," said analyst Craig Erlam at traders Oanda.

"More than 12 months on and it seems like the first hike is imminent; all we?re waiting on now is the Fed to remove its pledge to be 'patient' which in its words means no rate hike for at least the next two months.

"If that comes today, as has been widely speculated, that would mean an interest rate hike could come as early as June, although not necessarily that particular month."

Shanghai and Hong Kong were the stand-out performers in Asia, on hopes of fresh stimulus measures from China, dealers said.

Japan's Nikkei index rallied from early losses as Nintendo soared more than 21 percent, hitting its daily stop limit, after the company announced plans to enter the mobile gaming market.

Hong Kong gained 0.91 percent, Tokyo rose 0.55 percent and Sydney was marginally higher, while Seoul finished in the red.

Shanghai added 2.13 percent to its highest close since mid-May 2008, with investors buoyed by comments from Chinese Premier Li Keqiang that the government can support the economy if it continues to struggle.