LONDON, Jan 30: Europe’s main stock exchanges retreated on Wednesday, as investors digested more negative subprime news ahead of a vital interest rate decision from the US Federal Reserve, dealers said.

The US central bank was tipped to trim rates again after last week’s steep emergency cut that was aimed at steadying volatile world stock markets.

In Europe on Wednesday, the Paris CAC 40 of leading shares dived 1.16 per cent to 4,884.37 points, London’s FTSE 100 fell 0.77 per cent to 5,839.70 and Frankfurt’s DAX 30 dropped 0.51 per cent to 6,858.12.

The Euro Stoxx 50 index of leading eurozone shares sagged 0.78 per cent to 3,780.27.

In London, Royal Bank of Scotland stock tumbled 1.78 per cent to 1,825 pence.

Later Wednesday, some analysts expect that the US Federal Reserve will slash rates by a half-point, which would take the key federal funds rate to 3.00 per cent.

Financial markets were roiled last week by an emergency 0.75 per centage point rate cut amid fears that the world’s largest economy could be headed for a recession.

In our view, the main risk scenario is that the Fed sours market sentiment with a 25 basis points rate cut, said Commerzbank analyst Gavin Friend on Wednesday.

Such an outcome risks sending equity markets lower. But he added: The Fed still has further to go and should not waste anytime before cutting again as economic conditions warrant a quick and aggressive easing.—AFP