World stocks held broadly steady above this months' one-year low Wednesday, while government bonds also stabilized, as investors looked to the Federal Reserve to announce steps to guide long-term U.S. interest rates lower to help a faltering economy.
The dollar fell close to record lows against the yen ahead of Japan's fiscal half-year end, which encouraged some investors to unwind their U.S. fixed income assets and repatriate gains.
The euro held above its seven-month low against the dollar after Greece and international lenders showed signs of progress in negotiations key to give Athens more loans to avoid default.
The Fed is expected to announce at 2:15 p.m. ET plans to rebalance its portfolio in favor of longer-dated bonds and so push long-term interest rates -- already near historic lows -- even lower in a move known as Operation Twist.
The market expects that the Fed will come up with some new plans to stimulate the economy. Investors will be extremely disappointed if the Fed does not announce a plan to rebalance its portfolio, Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels, told Reuters.
But if it does, we might see limited reaction as it is already priced in.
MSCI world equity index was broadly steady on the day, staying around 4 percent above the one-year low set earlier in September.
European stocks fell around 0.4 percent while emerging stocks were largely unchanged on the day.
U.S. crude oil lost 0.4 percent to $86.55 a barrel.
Bund futures were down 9 ticks, ahead of the closely-watched sale of 5 billion euros of German 10-year Bunds, which will test investor demand for safe-haven assets.
The strength of today's Bund auction will indicate whether sub-2 percent yields are sustainable or whether more bad news is required, Credit Agricole said.
The euro zone debt crisis is likely to stay on investors minds after Italy's credit rating downgrade increased strains on European banks.
The Greek government will make announcements later on Wednesday on austerity measures it is discussing with its international lenders to save the country from bankruptcy.
The dollar rose 0.1 percent against a basket of major currencies and it fell as low as 76.10 yen.
The euro lost 0.1 percent to $1.3681, above its seven-month low below $1.35 set on September 12.
Investors are also looking to a meeting of finance ministers from the BRIC emerging nations -- Brazil, Russia, India and China -- in Washington this week after Brazil said it was willing to pump in $10 billion through the IMF to help Europe.
(Editing by Toby Chopra)