NEW YORK, Dec 14 ― Global stock markets fell and the dollar gained ground yesterday as investors waited for news from a host of central bank meetings this week and mulled a future without the Fed's safety net.

The US Federal Reserve is expected to signal a faster wind-down of asset purchases, which could move it one step closer to raising interest rates. The Fed's policy-setting committee will also update its members' rate expectations over the next couple of years.

The dollar edged higher ahead of the upcoming meetings, with investors eyeing the possibility that the Fed will start to raise rates in 2022.

"(The) central bank rate decisions this week will likely show stocks have to move higher without the help of central bankers,” said Edward Moya, senior analyst at OANDA.

"Volatility will remain elevated throughout all of (these) decisions from the Fed, ECB, and BOE.”

The European Central Bank, the Bank of England and the Bank of Japan are also meeting this week, and are each heading toward normalising their own monetary policies.

Fears over the Omicron variant of Covid-19 weighed on US and European markets after British Prime Minister Boris Johnson warned of a "tidal wave” of new cases, and the World Health Organisation said it poses a "very high” global risk, with some evidence that it evades vaccine protection.

The FTSE index fell 0.83 per cent.

The pan-European STOXX 600 index lost 0.43 per cent and MSCI's gauge of stocks across the globe shed 0.80 per cent.

The Dow Jones Industrial Average fell 320.04 points, or 0.89 per cent, to 35,650.95, the S&P 500 lost 43.05 points, or 0.91 per cent, to 4,668.97 and the Nasdaq Composite dropped 217.32 points, or 1.39 per cent, to 15,413.28.

The dollar index rose 0.27 per cent, with the euro down 0.01 per cent to US$1.1282, as it is seen as vulnerable to a US rate hike given expectations that the Fed will tighten policy more quickly than the ECB.

The benchmark US 10-year Treasury yield fell yesterday and the yield curve flattened as traders prepared for a hawkish tone out of the Federal Reserve at their meeting.

The yield on 10-year Treasury notes was down 6.5 basis points to 1.424 per cent and the 30-year Treasury bond yield was down 6.7 basis points to 1.817 per cent.

The ECB, meeting on Thursday, is likely to confirm that its €1.85 trillion (RM8.8 trillion) pandemic emergency stimulus scheme will end next March.

Expectations for a rate hike at Thursday's Bank of England meeting have been pulled back as Omicron raises concern about the near-term economic outlook.

Oil futures eased as new doubts emerged about the effectiveness of vaccines against the Omicron coronavirus variant, though Opec predicted in its monthly report that the variant's impact on fuel demand would be mild.

Brent futures settled down 1.01 per cent at US$74.39 a barrel, while US West Texas Intermediate (WTI) crude settled down 0.53 per cent at US$71.29. ― Reuters