Forexpros - European stock markets were up on Wednesday, but well off their earlier highs as a rally fuelled by the Federal Reserve's pledge to keep rates at ultra-low levels "at least" through mid-2013 began to fade.
During European afternoon trade, the EURO STOXX 50 rose 0.45%, France's CAC 40 climbed 0.55%, while Germany's DAX 30 surged 2%.
The Federal Reserve pledged on Tuesday to keep its benchmark interest rate at an all-time low, adding that it will maintain a loose monetary policy until "at least through mid-2013."
The Fed also indicated that it "discussed the range of policy tools available to promote a strong economic outlook recovery in a context of price stability" and said it was prepared to employ the tools "as appropriate".
Shares in Italian and French lenders erased gains to trade broadly lower amid ongoing fears over sovereign debt contagion in the euro zone.
Societe Generale and BNP Paribas saw shares tumble 4.2% and 2.95% respectively, while Italian banks Unicredit and Intesa Sanpaolo retreated 2.55% and 4.7% respectively.
On the upside, Commerzbank saw shares climb 2% despite reporting a 93% drop in second quarter profit, as it took a EUR760 million impairment on Greek sovereign bonds.
Swiss-based food giant Nestle saw shares gain 1.2% after it said first half profit fell 14% to CHF4.7 billion, as a strong Swiss franc and higher raw material prices weighed on results. However, the figure still came in better than expectations for profit of CHF4.63 billion.
In London, the FTSE 100 jumped 1% as shares in insurance provider Standard Life soared after reporting better-than-expected first-half earnings.
The life insurer saw shares rally 10.75% after it said that first-half operating profit rose 44% to GBP262 million, beating expectations for profit of GBP193.5 million.
Shares in the beaten up financial sector were also higher, with Royal Bank of Scotland shares gaining 3.1%, Barclays up 4.5%, while Lloyds Banking Gorup saw shares surge 5.1%.
Meanwhile, the outlook for U.S. equity markets was downbeat ahead of earnings reports from technology giant Cisco Systems, department store operator Macy's and media company News Corp.
The Dow Jones Industrial Average futures pointed to a loss of 0.45%, the S&P 500 futures shed 0.15%, while the Nasdaq 100 futures declined 0.4%.
Later in the day, the U.S. was to produce data on the federal budget balance as well as reports on crude oil stockpiles and wholesale inventories.