European equities closed higher on Wednesday, recouping the previous day's losses, as investors prepared for the outcome of the U.S. Federal Reserve's final policy meeting of the year.
Fed decision watched
The FTSEurofirst 300 Index provisionally closed 0.9 percent higher, with all major European indexes and sectors posting gains. The U.S. central bank's monetary policy committee will conclude a two-day meeting on Wednesday amid talk that stronger economic data in recent weeks, including employment and consumer confidence, argue in favor of a reduction of its monthly bond purchases.
In the U.S., stocks mostly rose on Wednesday as Wall Street also waited to learn what the Federal Reserve would announce at 2 p.m. ET. Fed Chairman Ben Bernanke will speak at a news conference at 2:30 p.m.
Economic reports on Wednesday had housing starts jumping to a near six-year high in November, the latest show of strength in the housing market that could give the Fed another reason to begin cutting its $85 billion in monthly bond purchases.
Andrew Wilkinson, chief economic strategist at Miller Tabak, told CNBC via email that: "The FOMC will reduce its bond purchases by a paltry $5 billion starting at the December meeting." His view ran counter to the majority view that the central bank would wait for the first quarter of 2014 to make a move.
UK data beats
In Europe meanwhile, Germany's Ifo business climate index met expectations on Wednesday with a rise to 109.5 for December from 109.3 in November. The component of the data that measures current conditions came in below estimates, but forward looking expectations showed businesses in Germany were more bullish than forecasts in a Reuters poll. The DAX provisionally closed higher by 1.1 percent.
In the U.K., the unemployment rate fell faster than expected in the three months to October, sliding to 7.4 percent -- its lowest level in four and a half years. Analysts had expected the rate to remain at 7.6 percent, according to a Reuters poll. The fall takes U.K. unemployment closer to 7 percent, which is the Bank of England's threshold level for considering a hike in interest rates.
(Read More: UK unemployment falls putting rate hike in focus)
M&S shares fall
In stocks news, shares of BP provisionally closed down by 0.02 percent, despite news that the oil company had made a major discovery in the Gulf of Mexico.
Vestas Wind shares closed higher by roughly 5.30 percent after the Danish wind turbine company received a large order from the U.S.
Shares of Electrolux received a bounce after an upgrade by UBS to a "buy" from a "neutral;" shares of the electronic equipment maker closed higher by around 3.5 percent.
U.K. retailers were the standout laggards on European benchmarks, amid reports that holiday sales have been sluggish. Shares of Marks & Spencer provisionally closed down 2.38 percent after a downgrade from UBS added to woes.
Bwin.party shares closed higher by 8.34 percent, after the online gambling company announced that it expected a boost next year due to the soccer World Cup in Brazil, which would be a catalyst for 2014 growth.
Meanwhile in Asia, stocks closed mostly higher on Wednesday but sentiment was cautious with investors reluctant to make decisive moves before the Fed's policy outcome.
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