Shares mostly lower following Fed decision to further reduce stimulus

By , on January 30, 2014

TOKYO—Shares were lower Thursday as weak economic data from China and Japan deepened jitters over ongoing reductions in U.S. monetary stimulus.

The U.S. Federal Reserve’s decision to further “taper,” or reduce, its mortgage and long-term bond purchases roiled markets, cutting short a rebound spurred by aggressive interest rate hikes by the Turkish central bank.

In early European trading, Germany’s DAX fell 0.3 per cent to 9,313.41. Britain’s FTSE 100 drooped 0.4 per cent to 6,521.48 and France’s CAC 40 lost 0.3 per cent to 4,142.75.

Futures foreshadowed a stable day on Wall Street, with Dow and S&P 500 futures each up less than 0.1 per cent.

Markets remained uneasy over the Fed’s announcement Wednesday that it would continue to cut back on asset purchases that have supported the U.S. economic recovery by keeping interest rates low.

Though the rationale for the “tapering” of such purchases is that the economy no longer needs extraordinary support, an unknown but significant amount of those funds flowed into stocks and other assets with higher returns. The prospect that those sources of liquidity may dry up has rattled markets across the globe.

In Asia, continued upward pressure on the yen, viewed as a safe haven from turmoil in emerging markets trading, dragged Japan’s Nikkei 225 index lower. It fell 2.5 per cent to 15,007.06, regaining some ground lost after the government reported retail sales fell 1.1 per cent in December from the month before.

The release of a survey confirming that China’s manufacturing contracted in January added to the gloom, with Hong Kong’s Hang Seng down 0.5 per cent to 22,035.42.

Markets in Taiwan and South Korea were closed on the eve of the lunar new year. Shares in Australia, New Zealand, mainland China, Indonesia, Singapore, India and the Philippines fell, while Malaysian shares rose.

In energy trading, benchmark U.S. oil for March delivery was up 23 cents to $97.59 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained 7 cents to close at $97.43 on Wednesday.

In currencies, the euro fell 0.3 per cent to $1.3613. The dollar edged 0.2 per cent higher to 102.29 yen.