By Shreyashi Sanyal and Johann M Cherian

(Reuters) -European shares ended higher on Wednesday ahead of the U.S. Federal Reserve’s likely third straight jumbo-sized interest rate hike later in the day, while shrugging off Russia’s announcement of a partial military mobilisation.

The continent-wide index ended 0.9% higher, bouncing back after hitting its lowest level since early July earlier in the day after Russian President Vladimir Putin also accused the West of “nuclear blackmail” over the war in Ukraine.

Attention gradually moved back to U.S. central bank policy, as the Fed is seen raising its benchmark lending rate by 75 basis points (bps) later in the day, continuing its aggressive fight against persistently high inflation.

“Vladimir Putin’s decision to go for partial mobilisation while waving his nuclear arsenal around is a serious development, but for now markets are too focused on what they hope the Fed might say,” said Chris Beauchamp, chief market analyst at online trading platform IG.

A few traders expect the U.S. central bank to increase rates by a full percentage point. [FEDWATCH]

“The 75 bps hike is priced in at this stage but where it gets interesting, is what’s the terminal rate going to be?” said Giles Coghlan, chief market analyst, HYCM.

“The market wants to see if the Fed is going to say we’re actually in a bit of a stickier situation than we thought so we’re going to have to be more aggressive than you have been expecting.”

Gains in defence stocks also offered support, with Rheinmetall, Leonardo, Thales and BAE Systems (OTC:) up between 4.0% and 9.3%.

However, Russia’s military mobilisation amplified concerns over the conflict that has raised the possibility of power rationing and potential blackouts during the winter after Russia abruptly turned off the taps on a main pipeline to Europe.

Germany confirmed the nationalisation of Uniper, the country’s largest importer of Russian gas, as it scrambles to secure non-Russian sources of power. The gas importer’s shares were down 25.3%.

Fortum shares surged 9.5% after Germany agreed to nationalise Uniper by buying the Finnish firm’s stake.

Energy stocks rose 1.6% as oil prices climbed following the news of mobilisation. [O/R]