Portugal Colonial - Stocks advance before US rate hike

The dollar reached the highest level in 20 years against a basket of major rival currencies with investors seeking safety as Russia escalates operations in its war against Ukraine.

The Dollar index, which compares the US unit against currencies including the euro, pound and yen, jumped to 110.87 points, also as the Fed prepares a third successive jumbo rate hike to combat decades-high inflation.

The British pound hit a new 37-year low at $1.1305, even as the Bank of England prepares to announce its own large interest rate hike Thursday.

"Global stock markets remain under pressure as investors await the Federal Reserve's much-anticipated interest rate decision today, keep a close eye on the energy crisis in Europe, and weigh other risks including a slowing Chinese and global economies," said City Index analyst Fawad Razaqzada.

Although most European and US equity indices were advancing ahead of the Fed's decision, Razaqzada said he believes "the path of least resistance is to the downside and the selling pressure will likely resume amid a bearish macro-outlook."

Stocks have taken a battering since hotter-than-expected US inflation data last week solidified expectations that the Fed will announce another 75 basis-point lift, with some predicting a full percentage-point move.

The current Fed rate is 2.25 to 2.50 percent.

"The Fed is having to be cruel in order to restore price stability," noted Russ Mould, investment director at AJ Bell.

"Higher rates will cause pain to households and businesses, with the jobs market being closely watched for signs of redundancies and hiring freezes."

In the event of no surprises on the rate hike, the US central bank's forecast and post-meeting comments from boss Jerome Powell will be the main attraction for investors.

Briefing.com analyst Patrick O'Hare said investors will be looking at the updated projection for the peak of this cycle of interest rate hikes, or the terminal rate, with the market now expecting a peak of 4.50-4.75 percent by May 2023.

If the Fed's projection is lower, then a relief rally could come about, depending on what Powell says in his press conference, he said.

If Powell "strikes a softer tone than he did at the Jackson Hole Conference (of central bankers) in late August, suggesting the Fed may be getting close to a point where it can pause its rate hikes, then the stock market should respond quite favorably," said O'Hare.

Other central banks are meeting this week. On Tuesday, policymakers in Sweden surprised markets by unveiling a one percentage-point hike.

Adding to the cautious mood was Vladimir Putin's announcement of a "partial mobilisation" as Russia's president upped the ante in his battle against Ukraine.

Putin said he would annex the territories his forces had occupied and backed referendums in four regions in Russian-held parts of Ukraine.

"We will definitely use all means available" to protect Russian territory, he warned, adding: "That's not a bluff."

The moves mark an escalation in the seven-month war, which has roiled markets and sparked an energy crisis.

Oil prices surged nearly three percent on Wednesday before paring gains. They have wilted in recent months on weaker demand expectations fuelled by recession fears.

Asian stock markets closed lower Wednesday, reversing Tuesday's bounce.

- Key figures at around 1330 GMT -

London - FTSE 100: UP 0.7 percent at 7,240.77 points

Frankfurt - DAX: UP 0.2 percent at 12,697.48

Paris - CAC 40: UP 0.3 percent at 5,998.69

EURO STOXX 50: UP 0.2 percent at 3,474.62

New York - Dow: UP 0.6 percent at 30,880.31

Tokyo - Nikkei 225: DOWN 1.4 percent at 27,313.13 (close)

Hong Kong - Hang Seng Index: DOWN 1.8 percent at 18,444.62 (close)

Shanghai - Composite: DOWN 0.2 percent at 3,117.18 (close)

Pound/dollar: DOWN at $1.1346 from $1.1384 Tuesday

Euro/dollar: DOWN at $0.9913 from $0.9970

Euro/pound: DOWN at 87.36 pence from 87.63 pence

Dollar/yen: UP at 143.96 yen from 143.72 yen

Brent North Sea crude: UP 2.3 percent at $92.69 per barrel

West Texas Intermediate: UP 2.3 percent at $85.85 per barrel

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P.Mira--PC