Portugal Colonial - European stocks slide after Fed, before ECB rate calls

The European Central Bank was expected to hike its own interest rate Thursday as prices of goods and services continue to rise at a strong pace.

Ahead of the ECB decision, Norway's central bank lifted its key interest rate -- and warned that it would probably increase the rate again in June.

"The dollar sold off on the idea that the Fed will now take a breather and pause the rate hikes, and perhaps on the idea that the ongoing bank stress will likely make the Fed change its mind regarding a rate cut later this year," noted Swissquote analyst Ipek Ozkardeskaya.

- Fresh banking fears -

Fears of widespread banking turmoil were revived as shares in regional US lender PacWest plummeted by more than half.

The selloff was apparently spurred by reports the bank was considering the possibility of a sale or other capital-raising measures in the wake of the recent collapses of other mid-size lenders.

PacWest sought to reassure investors in a statement, insisting it had not "experienced out-of-the-ordinary deposit flows" since the banking fears first arose, and that its "cash and available liquidity remains solid".

The bank said it was routine to "continuously review strategic options", adding it had been "approached by several potential partners and investors".

Oil prices were steadier after sliding the previous day on expectations of weaker demand owing to an economic slowdown.

Also on investors' minds were fears that Democrats and Republicans might fail to strike a deal on raising the US debt ceiling, triggering a damaging default as early as June 1.

- Key figures around 1100 GMT -

London - FTSE 100: DOWN 0.9 percent at 7,719.51 points

Frankfurt - DAX: DOWN 0.8 percent at 15,690.87

Paris - CAC 40: DOWN 1.0 percent at 7,334.38

EURO STOXX 50: DOWN 0.9 percent at 4,273.22

Hong Kong - Hang Seng Index: UP 1.3 percent at 19,948.73 (close)

Shanghai - Composite: UP 0.8 percent at 3,350.46 (close)

Tokyo - Nikkei 225: Closed for holiday

New York - Dow: DOWN 0.8 percent at 33,414.24 (close)

Euro/dollar: FLAT at $1.1062 Wednesday

Pound/dollar: UP at $1.2574 from $1.2562

Dollar/yen: DOWN at 134.44 yen from 134.99 yen

Euro/pound: DOWN at 88.00 pence from 88.03 pence

West Texas Intermediate: FLAT at $68.60 per barrel

Brent North Sea crude: UP 0.4 percent at $72.58 per barrel

burs/bcp/rfj/rl

P.Serra--PC