Floor traders check stock prices at the Hong Kong Stock Exchange on Wednesday. (Kin Cheung/Associated Press)

World stock markets sought direction Wednesday as a months-long rally sputtered and investors waited for clues from the U.S. Federal Reserve about the global recovery's strength.

In early-morning trading in Europe, Britain's FTSE 100 was up 0.4 per cent at 5,162.52, Germany's DAX added 0.4 per cent to 5,733.41 and France's CAC 40 climbed 0.3 per cent to 3,833.37.

Most Asian markets closed moderately lower. Japan's market was closed for a national holiday.

Oil prices hovered above $71 US a barrel following a big jump overnight while the U.S. dollar continued to languish, falling against the yen and euro.

Asian markets were invigorated Tuesday by the Asian Development Bank raising its growth forecasts for China and India, two of the region's biggest economies. Investors have piled into Asian equities this year, but some analysts say the rally, fuelled by loose monetary policy and government stimulus spending, has gotten ahead of economic reality.

Hong Kong's Hang Seng index fell 105.62, or 0.5 per cent, to 21,595.52 and South Korea's Kospi dropped 7.41, or 0.4 per cent, to 1,711.47. Australia's benchmark gained 1.5 per cent while China's Shanghai index shed 1.9 per cent as investors cashed out ahead of a slew of new initial public offerings.

Elsewhere, New Zealand's market rose 0.2 per cent after its economy unexpectedly grew in the second quarter. Singapore's index was fractionally higher and Taiwan fell 1.9 per cent. India's Sensex was down 0.1 per cent.

"All the markets are overbought and people are waiting for a reason or catalyst to take profits," said Peter Lai, investment manager at DBS Vickers in Hong Kong.

Some economic data from the U.S., the world's largest economy, has showed signs of improvement, but unemployment is likely to continue rising, resulting in a weak recovery, he said.

Investors will watch closely what the Fed has to say about the economy and the scale of the recovery after its meeting wraps up Wednesday.

The Fed is widely expected to leave rock-bottom interest rates unchanged, though investors will be looking for clues in the central bank's statement about when hikes might start.