In the 11-nation euro-zone, the Euro Stoxx 50 index fell back 0.36 per cent to 4,985.27 points. French stocks suffered in Paris, where the CAC 40 index was down 0.45 per cent at 6,371.43 points in initial trading. The FTSE index of 100 leading shares lost ground in early trading, before rebounding to stand little changed at 6,342.8 points. Frankfurt held firm as investors played catch-up after missing Tuesday's positive session because of its holiday marking the 10th anniversary of reunification. The DAX index was up 0.3 per cent at 6,883.46 points.

The euro hovered at 0.8752 dollars in early trading. Investors were on the alert after the technology-laden Nasdaq tumbled 3.19 per cent on Tuesday to below the 3,500-point threshold, with little impetus for a continuation of the previous day's rally.

The Dow Jones Industrial Average edged up 0.18 per cent. The decision of the US Federal Reserve to continue its tight monetary policy by leaving interest rates on hold on Tuesday had been largely expected by the markets, and investors appeared more concerned with slightly hawkish comments on the inflation outlook. And the markets paid little attention to gains in Asia, where the Nikkei-225 index closed up 1.5 per cent in Tokyo and the Hang Seng index showed a gain of 1.1 per cent in Hong Kong.

Investors were also awaiting the interest-rate decisions of the British and euro-zone central banks, to be announced on Thursday, with most economists predicting a continuation of prevailing interest rates in both regions.

Telecom, media and technology (TMT) stocks were in focus again after sharp losses overnight on the Nasdaq.

In London, Logica dropped 4.2 per cent to 787.5 pence, Sage shed 3.9 per cent to 521.5 per cent, and Sema was showing a loss of 3.7 per cent at 1,191 pence. The information group Reuters fell 3.3 per cent to 1,293 pence after shares in Tibco Software, in which it owns 44 percent, dropped 20 per cent overnight on the Nasdaq after posting interim results.

Other media issues followed. Pearson shed 2.6 per cent despite press reports that it would float 21 per cent of Spanish subsidiary Grupo Recoletos.

Chemicals issues gained on the back of strong sector performance overnight on Wall Street. ICI climbed 3.5 per cent to 388.25 pence in London, while in Frankfurt BASF was showing a gain of 2.3 per cent at 41.60 per cent. BMW led the German gainers, climbing 2.24 per cent to 40.59 euros after announcing a 30 per cent increase in US vehicle sales in September. But Software giant SAP slumped 6.05 per cent to 17.20 euros in the wake of the European Commission approval of a joint E-commerce venture with Siemens. Siemens itself fell 1.1 per cent to 144.85 euros.