* U.S. stocks edge lower in early U.S. trading
* Fed tipped to hike rates 25 bps later on Wednesday
* Some caution in case Fed hints at a faster pace of
* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh
(Updates with early U.S. market activity, changes dateline,
By Caroline Valetkevitch
NEW YORK, Dec 14 World stock indexes and the
U.S. dollar eased on Wednesday ahead the U.S. Federal Reserve's
statement and expected interest rate increase, with investors
bracing for what the central bank may signal about future hikes.
Expectations that the Fed would take a cautious stance on
its rate outlook caused investors to take profits in the dollar,
which has gained nearly 4 percent between the Nov. 8 U.S.
election and last Friday.
The Fed is widely predicted to lift interest rates 25 basis
points to 0.50-0.75 percent at the end of a two-day meeting on
Wednesday, which would be its first rate hike in a year and its
second since the financial crisis. The rate announcement is due
at 2 p.m. EST (1900 GMT), followed by Chair Janet Yellen's news
conference 30 minutes later.
Investors will be examining the central bank's statement and
economic forecasts for any signs of how policymakers think
President-elect Donald Trump's election affects the outlook for
growth and inflation.
"It is not that (investors) are not expecting a rate hike
from the Fed, it is the element of the unknown which Yellen
would deliver in her statement," said Naeem Aslam, chief market
analyst at Think Markets.
Some analysts said the dollar's weakness showed a bias among
market participants that the Fed also may hint at financial
conditions having already tightened, given the surge in U.S.
Treasury yields and rally in the dollar in the wake of the Nov.
The challenge for the central bank may be how to signal
further rate increases without triggering strong gains in the
dollar that could undermine growth.
The dollar index, which measures the greenback against a
basket of six major currencies, was last down 0.3 percent at
U.S. stocks edged lower following Tuesday's rally to
all-time highs, led by losses in energy shares.
The Dow Jones industrial average fell 34.59 points,
or 0.17 percent, to 19,876.62, the S&P 500 lost 5.94
points, or 0.261476 percent, to 2,265.78 and the Nasdaq
Composite dropped 6.86 points, or 0.13 percent, to
MSCI's all-country world stock index was
down 0.2 percent, the pan-European STOXX 600 share index
ended down 0.5 percent.
Treasuries have already priced in a rate hike and more.
Yields on longer-dated U.S. Treasuries touched session lows
early as weaker-than-forecast rise in retail sales in November
reduced expectations of a pickup in U.S. consumer spending in
the fourth quarter.
The benchmark 10-year Treasury yield fell to a
session low of 2.426 percent. It was last at 2.437 percent, down
4 basis points from late on Tuesday, according to Reuters data.
In contrast to the Fed, the European Central Bank only last
week extended its asset-buying campaign and moved to purchase
more short-term debt.
Oil prices were down after data from the American Petroleum
Institute late on Tuesday showed U.S. crude inventories
unexpectedly rose last week, though they pared losses after
another report showed a smaller-than-expected build in
U.S. crude futures, which hit a high of $53.41 on
Tuesday, were down 71 cents at $52.27 a barrel. Brent crude
eased 70 cents to $55.03.
Spot gold was up 0.4 percent at $1,162.46 an ounce.
For Reuters new Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Sam Forgione in New York, Dhara
Ranasinghe in London and Tanya Agrawal in Bengaluru; Editing by
Robin Pomeroy and Nick Zieminski)