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Markets depressed amid Fed tapering talk

December 3, 2013

LONDON (AP) — Speculation that the U.S. Federal Reserve will start reducing its monetary stimulus this month weighed on stock markets Tuesday.

A surprisingly strong manufacturing survey from the Institute for Supply Management reinforced that speculation on Monday. Ahead of a raft of economic news this week, investors were in a jittery mood.

Whether the Fed does start reducing its $85 billion of monthly bond purchases will likely hinge on Friday’s nonfarm payrolls data for November. The Fed’s stimulus has shored up global stock markets over the past few years. So-called “tapering” of that stimulus could work the opposite way, even though it would be predicated on an improving U.S. economic outlook.

“Continuing to drive sentiment .... has been growing fears that the Fed will scale back its asset purchases when it meets in a couple of weeks’ time,” said Craig Erlam, market analyst at Alpari.

In Europe, the FTSE 100 index of leading British shares fell 1 percent to close at 6,532.43 while the CAC-40 in France slumped 2.7 percent to 4,172.44. Germany’s DAX lost 1.9 percent to 9,223.40.

In the U.S., the Dow Jones industrial average was down 0.7 percent at 15,901.86 while the broader S&P 500 index fell 0.4 percent to 1,793.51.

Earlier in Asia, Japan’s Nikkei 225 closed 0.6 percent higher at 15,749.66 following another bout of yen weakness. The yen’s sharp fall this year has made the Nikkei one of the best-performing indexes as it potentially boosts the competitiveness of the country’s exporters.

The yen has resumed falling on expectations that Japan’s central bank will maintain or even expand its super easy monetary policy until inflation reaches 2 percent.

Since the close of the Asian session, it has recouped some ground and the dollar was trading 0.5 percent lower at 102.39 yen. The dollar was also softer against the euro, which was trading 0.4 percent higher at $1.3597.

Thailand’s index also gained 0.3 percent after violent anti-government protests diminished as the country prepares to mark the 86th birthday Thursday of its revered monarch.

Elsewhere, Hong Kong’s Hang Seng shed 0.5 percent to 23,910.47 while China’s Shanghai Composite recovered from early losses, finishing 0.7 percent higher at 2,222.67.

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