Miners fall, autos climb
The FTSEurofirst 300 Index fluctuated on Wednesday, eventually settling to end the day lower by around 0.03 percent. The autos sector saw gains of around 0.9 percent as BMW shares soared 7.2 percent after the German car maker announced it expected to see higher sales and profits in the year ahead. The DAX closed 0.4 percent higher.
It comes after two days of gains in Europe, as tensions in the Ukraine eased following a speech from Russian President Vladimir on Tuesday stating he did not want to move further into Ukraine, following the recent occupation of Crimea.
Attention is now on the U.S. Federal Reserve which is set to give its latest policy announcement at 2 p.m. Eastern Time in the U.S. The conclusion of the Federal Open Market Committee's meeting and Fed Chair Janet Yellen's debut press conference as head of the Fed are in focus.
Economists expect the central bank to taper by another $10 billion and Peter Hooper, chief economist at Deutsche Bank Securities, said the Fed will want to change its forward guidance without making the markets worry about a rise in interest rates.
"To achieve this...the Fed is more likely to drop mention of the 6.5 percent threshold and strengthen its current references to other labor market indicators—for example highlighting their commitment to substantial further progress in reducing unemployment and raising inflation up to target, so long as inflation expectations remain stable," he wrote.
U.S. stocks wavered around the flatline Wednesday as investors took a breather following a sharp two-day rally and ahead of the Fed announcement.
Meanwhile back in Europe, the basic resources sector was lower due to its heavy exposure to events in China.
In Asia, the Shanghai Composite Index lost ground overnight after property developer Zhejiang Xingrun reportedly defaulted on its debt on Tuesday, less than two weeks after the mainland's first onshore corporate bond default.
Shares of Antofagasta, a Chilean-based copper mining group that is listed in the U.K., fell 5.3 percent after four different banks cut their price target on the firm.
Bad budget for bookies in UK
In the U.K., Chancellor George Osborne presented his budget for the year and revealed that growth forecasts for the U.K.'s economy had been upped for this year and next.
The Office for Budget Responsibility (OBR) said the economy looked set to grow by 2.7 percent in 2014 - an increase from its earlier forecast of 2.4 percent - and by 2.3 percent in 2015, up from 2.2 percent.
Furthermore, the budget scrapped the requirement that pensioners had to buy an annuity and imposed a 25 percent tax on certain betting machines. The former measure caused Legal & General (L&G) to close lower by 8.4 percent, while the latter led to bookmakers such as Ladbrokes and William Hill to decline by 11.7 and 6.8 percent respectively.
Kathleen Brooks, research director at Forex.com, said: "This budget is neutral for the pound, but could weigh on the FTSE 100, particularly if the market heaps pressures on the insurance sector who may find demand for their annuity products starts to wane sharply... (I)f the hangover from the budget lasts, then the insurance sector could act as a drag on the overall index."
(Read our live blog: UK budget: Latest news, reaction and analysis)
On the data front, the number of people in employment in the U.K. hit the highest level since records began in the three months to January, although the jobless rate held steady at 7.2 percent.
A hike in self-employment helped push the total number of people with jobs to a new record of 30.19 million between November 2013 and January.
Events in Ukraine - which have dominated market movements in recent weeks - have begun to ease. Putin signed a treaty formally making Crimea part of the Russian Federation on Tuesday, but said he was not looking to take control of any other regions. Russian stocks were flat on Wednesday.
However, in his budget speech, Osborne did say that any escalation in the crisis could hit wider European growth. Investors are expected to keep a keen eye on ongoing events in Ukraine with the possibility of more sanctions on Russia by western nations.
(Read more: What's Putin's next Ukraine move? It's anyone's guess)
On Wednesday, the U.S. warned Moscow it was on a path to isolation after Russian troops entered Ukraine's naval headquarters in Sevastopol and raised their flag.
"EU and U.S. leaders are hardly likely to sit idly by and do nothing and certainly have room to add further sanctions to the initial list announced Monday, which suggests that the recent volatility in stock markets is likely to continue for some time to come," Michael Hewson, the chief market analyst at CMC Markets, said in a note.
(Read more: US warns Moscow is on 'dark path' to isolation)