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World markets frown about the Fed's caution

LONDON - Concerns over the state of the global economic recovery following some cautious comments from the U.S. Federal Reserve weighed on global markets on Thursday ahead of a raft of U.S. economic data.

In Europe at around 8 a.m. Eastern, the FTSE 100 index of leading British shares was down 0.8 percent at 5,944, while Germany's DAX fell 1.6 percent to 9,728. The CAC-40 in France was 1.1 percent lower at 4,334.

U.S. stocks were set for a positive opening on Thursday morning following Wednesday's big retreat on Wall Street, when both the main indexes fell by more than 1 percent. Futures on the Dow Jones industrial index were 0.2 higher and were up by 0.3 on the S&P 500. The tech-heavy Nasdaq was 0.8 percent higher.

The latest pullback in stock markets came after the Fed issued a cautious assessment of the global economy while also downgrading its view of U.S. growth. In a statement following their latest policy meeting, Fed officials suggested they might slow down the pace of interest rate hikes in light of the recent turmoil in financial markets.

However, they did give themselves room to maneuver by not committing outright to a delay. After the Fed hiked interest rates in December for the first time in more than a decade, there had been widespread speculation that it would pull the trigger again in March.

There's a raft of U.S. economic data later that could have an impact on how Wall Street performs. As well as weekly jobless claims, traders have figures on pending home sales and durable goods orders to digest.

The Fed was the latest central bank to sound a note of caution about the state of the global economy. Last week, the European Central Bank indicated that it may enact another monetary stimulus in March. The Bank of Japan holds a policy meeting overnight and many in the markets think it will commit to more stimulus measures itself.

"Already we've seen the ECB signal its intentions to ease monetary policy further in March, and I would not be surprised if we get a similar commitment from the BoJ tonight, at the very least," said Craig Erlam, senior market analyst at OANDA. "We could even see monetary easing announced tonight, which could have an impact on global markets."

In Asian trading, Japan's benchmark Nikkei 225 index gave up early gains to end 0.7 percent lower at 17,041. South Korea's Kospi added 0.5 percent to 1,907. Hong Kong's Hang Seng zigzagged before finishing 0.8 percent higher at 19,196. The Shanghai Composite Index in mainland China was fairly steady for most of the day until dropping steeply in the last hour, closing 2.9 percent lower at 2,655.

Worries over the global economy have prompted big moves in the oil markets over the past few weeks. The benchmark New York rate has fallen to near 13-year lows, for example. For now, a floor in the price appears to have been forged amid speculation that the OPEC oil cartel may decide to cut production. On Thursday, oil prices were flat following a big advance in the previous session. The benchmark New York rate was up 31 cents at $32.60 a barrel while Brent, the international standard, was up 33 cents at $33.43.

Trading in foreign exchange markets was subdued with the euro up 0.1 percent at $1.0908 and the dollar up 0.3 percent at 118.85 yen.

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