Europe shares close higher on Fed, China hopes

European shares closed largely higher on Wednesday, as investors bet the U.S. Federal Reserve would hold off on hiking interest rates.

The pan-European FTSEurofirst 300 (FTSE International: .FTEU3) closed provisionally higher by 0.5 percent at 1,386.

All major country bourses posted gains bar the U.K. FTSE 100 (FTSE International: .FTSE). The benchmark index ended 0.1 percent provisionally lower, hit by uncertainty ahead of the closely fought Scottish independence referendum.

Most European sectors posted gains, with basic resources (STOXX:.SXPP) and banks (STOXX:.SX7P-CH) outperforming.

The basic resources sector was boosted by heavily-weighted mining stocks with strong exposure to China. These gained on unconfirmed reports that the People's Bank of China is to provide hefty liquidity injections for China's five largest banks. The move has not been officially confirmed.

Asian stocks closed mixed on Wednesday following the reports.

Read More Is this the China stimulus we've been waiting for?

European bank stocks gained ahead of the launch of the European Central Bank's first Targeted Long-Term Refinancing Operations (TLTROs). The cheap loan scheme will start on Thursday and is expected to provide banks with up to 400 billion euros ($518 billion) of funds.

Meanwhile, the Fed will conclude its two-day policy meeting on Wednesday with a statement and press conference after European markets close.

Investors will be looking for hints as to when the Fed intends to start hiking rates from record lows. While the central bank is not seen beginning to tighten policy under the middle of next year, its statement, scheduled for publication at 7 p.m. London time, could shed light on timings. The Fed could also change its description of the labor market, to signal whether progress has been made towards its employment target.

U.S. stocks gained on Wednesday, with the the Dow (Dow Jones Global Indexes: .DJI) hitting another record high, on the assumption that a rate hike was still far off.

"I guess the market is anticipating a loosey-goosey Fed," said Jack Ablin, chief investment officer at BMO Private Bank.

Smiths Group shares fall

In stocks news, U.K. engineering group Smiths (London Stock Exchange: SMIN-GB) tumbled to close over 6 percent lower after its full-year profit fell.

Also at the bottom of benchmarks, Daily Mail and General Trust (London Stock Exchange: DMGT-GB) saw its shares slip more than 6 percent after the media company reported lower sales volumes and operating profit at the bottom end of market expectations.

Meanwhile, shares of U.K. retailer JD Sports (London Stock Exchange: JD.-GB) ended around 4.4 percent higher after the company announced a jump in pretax profit in its first half and raised its full-year outlook.

Spanish food processing firm Ebro (Mercado Continuo: EBRO-ES) closed up by around 2.5 percent after receiving an upgrade to "buy" from "neutral" by UBS.

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Correction: This article has been reflected to show shares in Smiths Group fell after the group reported earnings.