Global stocks notch up new high but it's all about the Fed

World stocks eked out a new record high on Wednesday and the dollar dipped against its major rivals with the focus on a U.S. Federal Reserve policy meeting that may give clues as to whether it will raise interest rates for a third time this year.

European shares opened lower after a slight rise on Asian bourses was enough to push MSCI`s World index, which tracks stocks in 46 countries, fractionally higher to a new record.

But with the Fed due to unveil its policy decision and economic forecasts at 1800 GMT, caution prevailed. There was little follow-through from U.S. President Donald Trump`s bellicose rhetoric over North Korea on Tuesday.

The dollar fell less than 0.1 percent against a basket of major currencies and was down against the euro, the yen and sterling.

The Fed is likely to say it will start to cut its holdings of about $4.2 trillion in bonds and mortgage-backed securities next month. Its forecasts and a news conference by Chair Janet Yellen will be scoured for clues to the interest rate outlook.

Markets are pricing in a 56 percent probability of the Fed raising rates in December.

U.S. 10-year Treasury yields, which edged up on Tuesday, retreated slightly. German equivalents, the benchmark for euro zone borrowing costs, edged up less than a basis point to 0.45 percent.

The European Central Bank is widely expected to say next month that it will begin scaling back its asset-purchase stimulus programme from January, even though a stronger euro, which dampens inflation, has complicated the outlook.

"If we move closer to a U.S. rate hike, that should come along with a bit more dollar strength and euro weakness which would harden the ECB`s exit case and be a headwind for government bonds," said Commerzbank strategist Rainer Guntermann.

The euro rose 0.1 percent to $1.1999 while the yen rose 0.1 percent to 111.44 per dollar. Sterling, which has jumped in recent days after the Bank of England said interest rates were likely to rise in coming months, gained 0.3 percent to $1.3511.

The New Zealand dollar hit its strongest in more than a month at $0.7374 after a poll showed the ruling National Party regaining a wide lead over the opposition before Saturday`s election.NORMALISATION

"If anything, risks to the dollar are skewed to the downside given balance sheet normalisation was already well-telegraphed and should be conducted in a very gradual manner," ING strategists wrote in a note.

The pan-European STOXX 600 share index dipped less than 0.1 percent. An index of European banks was a leading faller, down 0.3 percent.

MSCI`s broadest index of Asia-Pacific shares outside Japan added 0.1 percent. Japan`s Nikkei closed up 0.05 percent and Shanghai added 0.3 percent.

Oil prices rose after Iraq`s oil minister said Organization of the Petroleum Exporting Countries producers and others were considering extending a supply cut and after data showed U.S. crude stocks were lower than expected.

Brent crude rose 23 cents a barrel to $55.37.

Gold edged up 0.1 percent to $1,313 an ounce as the dollar dipped.

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)