London - European stock markets slid on Wednesday after sharp gains the day before, while oil prices drifted to new lows, as investors awaited the outcome of the US Federal Reserve meeting.
Oil prices extended their losses to fresh five-and-a-half-year lows, while the Russian ruble rebounded a bit after its recent plunge against the dollar.
Global markets have been in turmoil this week owing to concerns about the effect of plunging oil prices on energy firms as well as the crude-dependent Russian economy, which is also straining under Western sanctions.
Eyes were on the outcome of the Fed's two-day meeting, with dealers looking for some guidance over monetary policy amid growing speculation that the central bank will raise interest rates by the middle of 2015.
"Decision day for the Federal Reserve and the big question is whether they will refine their forward guidance and remove the term 'considerable time' from their description of how long they plan to keep interest rates low to something more data-dependent," said Rebecca O'Keeffe, head of investment at stockbroker Interactive Investor.
"This term is highly significant and its removal would signal the Fed's intention to start raising rates within the next few months and have a major knock-on effect for both equity and bond markets. However, given current market fragility, the Fed will need to tread carefully."
The prospect of a tighter US monetary policy helped push up dollar, with the euro sliding to $1.2459 from $1.2498 late in New York on Tuesday.
In late morning deals, London's benchmark FTSE 100 index was down 0.55% to 6 296.91 points. Frankfurt's DAX 30 dropped 0.69% to 9 498.08 points and in Paris the CAC 40 retreated 0.44% to 4 075.34 compared with Tuesday's close.
"European shares are trading lower this morning, failing to extend yesterday's impressive afternoon turnaround as a sharp sell-off in late US trading is hurting sentiment," said Markus Huber, senior analyst at broker Peregrine & Black.
US stocks Tuesday finished lower following a topsy-turvy session amid unease over plunging oil prices and a crash in the Russian rouble, traders had said.
Russia's finance ministry was Wednesday selling its foreign currency to support the rouble, a spokesperson told AFP.
"The finance ministry considers the ruble extremely undervalued and is starting to sell its leftover currency on the market," spokesperson Svetlana Nikitina said.
The Russian currency dived 20% during trading on Tuesday to 80 against the dollar and 100 to the euro, testing President Vladimir Putin's ability to ride out both the country's economic storm and his clash with the West.
The Russian central bank raised its key interest rate to 17.0% from 10.5% in a bid to prop up the currency, but the move "has failed to stabilise the ruble," said Sebastien Barbe, head of emerging market research and strategy at Credit Agricole.
The rate rise and plunging oil prices suggest "a meaningful recession next year", Barbe said in a note to clients.
In Wednesday deals, Brent North Sea crude for delivery in February was down 63 cents to 59.38 a barrel after hitting a new five-year low at $59.10.
"Markets are on a true roller-coaster ride at the moment, as the domino effects from lower oil prices translate into mounting risks for countries, sectors and individual stocks," O'Keeffe said.
"With double-digit daily moves in currency markets and high volatility causing wild swings in minutes, many investors are understandably reluctant to commit to a long-term position."