Global markets sluggish despite seeming U.S. budget deal

LONDON - Financial markets were sluggish Wednesday as investors remained focused on the prospect of a reduction in the U.S.'s monetary stimulus.

A week ahead of the next policy meeting of the Federal Reserve, investors appear to be holding back from making big trading decisions.

Following a run of solid economic data, particularly with regard to the labor market, there's a growing expectation in the markets that the Fed will decide to start reducing its $85 billion worth of financial asset purchases.

However, any so-called tapering is expected to be accompanied with a renewed commitment to keep interest rates low. That, analysts say, helps explain why investors have held their nerve in recent weeks.

"It appears that the market is no longer thinking that tapering equals tighter monetary conditions," said Kathleen Brooks, an analyst at Forex.com.

In Europe, the FTSE 100 index of leading British shares was up 0.3 percent at 6,541 while Germany's DAX rose 0.2 percent to 9,137. The CAC-40 in France was 0.7 percent higher at 4,121.

Wall Street was poised for a flat opening, with little economic news scheduled expected. Dow futures and the broader S&P 500 futures were both down 0.1 percent.

There was an equally subdued tone in the currency markets, with the euro flat at $1.3763 and the dollar 0.4 percent lower at 102.49 yen.

Earlier in Asia, the mood was a bit more downbeat. Japan's Nikkei 225 closed down 0.6 percent at 15,515.06. Hong Kong's Hang Seng tumbled 1.7 percent to 23,338.24 and China's Shanghai Composite shed 1.5 percent to 2,204.17.