Fund selling pressured London Metal Exchange base metals Wednesday, but market players await the Federal Reserve's statement due shortly for further clues over the health of the U.S. economy and fresh price direction, said traders.

Activity across the complex was "rather dull", with a large majority of market players sidelined ahead of the Federal Reserve's statement, a London-based broker said.

The two-day meeting of the Federal Open Market Committee, the Fed's policy-making arm, continues Wednesday with a rate decision expected at 1815 GMT.

The FOMC is expected to leave rates unchanged at 5.25%, but market players will be poring through the statement for clues about the U.S. housing market, inflation risks and the general health of the economy, traders say.

Fund selling pressured prices across the LME complex, but three-month zinc posted the largest percentage loss following a sharp LME stock inflow of 5,050 tons to 106,800 tons Wednesday. LME stocks have climbed roughly 14% since the beginning of March, and 18% since the start of 2007.

"The rise in LME zinc inventories – in contrast to the consistent downtrend over the course of 2006 – coupled with large Chinese zinc exports has weighed on zinc sentiment," said Kevin Norrish of Barclays Capital.

Adding to price pressure, the World Bureau of Metal Statistics said Wednesday that the global zinc market was in a surplus of 14,000 metric tons in January.

The London broker said the next level of support for zinc is $3,000/ton.

Meanwhile, nickel continued to fall in Europe – down roughly 9% from Monday's high – taking its cue from weakness in Asia and a heafty LME stock rise Wednesday.

LME nickel stocks rose 654 tons to 4,300 tons Wednesday, the largest daily net increase since Jan. 8, 2007, said Norrish. Available LME nickel stocks comprise roughly one day's worth of global nickel consumption.

However, the recent selloff will only be a major concern to the market if nickel falls below $42,000/ton, said another LME trader. "In a market that's been so fundamentally bullish for the last several months, a correction of this kind isn't unexpected," he said.

Three-month copper remained largely unchanged from its open. The metal fell to a low of $6,555/ton before recouping some of those losses to a PM kerb of $6,608/ton.

Despite a drawdown of LME copper stock, the market focused on the bearish news from the WBMS showing a surplus of 6,000 tons during January 2007, up from a surplus of 5,000 tons in December 2006, said the London broker.

This follows the International Copper Study Group's report Tuesday that the global refined copper market was in surplus of roughly 350,000 tons in 2006, compared with a deficit of around 100,000 tons in 2005.