Global stock markets, except Japan, in the red amid signals that Fed may cut stimulus sooner

KUALA LUMPUR, Malaysia – Global stock markets, except Japan, were in the red Thursday amid jitters over new signals from the U.S. Federal Reserve that it may cut monetary stimulus sooner than expected.

In Europe, the FTSE 100 index of leading British shares fell 0.3 per cent to 6,659.10 and Germany’s DAX lost 0.6 per cent to 9,148.18. The CAC-40 in France shed 0.7 per cent to 4,259.53. Futures suggested modest gains on Wall Street, with Dow futures up 0.2 per cent and S&P 500 futures up 0.1 per cent.

Minutes from the Fed’s latest policy meeting showed that the central bank would likely start tapering off its bond purchases in “coming months” if the job market improved further. Fed members also weighed the possibility of slowing the purchases even without clear evidence of a strengthening job market.

The Fed’s $85 billion monthly bond purchases have kept interest rates low to spur spending and growth but also sent a wave of investment into stocks in search of higher returns.

Credit Agricole CIB in Hong Kong said in a market commentary that reduction of the bond purchases could begin as early as January, contrary to some expectations that the stimulus could stay until March at least.

“Together with extensive discussions on alternative policy response to keep rates low … it indeed looks increasingly likely that the focus is now on keeping rates low after tapering, rather than delaying tapering,” it said.

The Fed’s stimulus, in its various guises, has helped shore up risky assets such as stocks around the world and emerging market currencies, over the past few years as the money created has been recycled through financial markets.

Earlier in Asia, Hong Kong’s Hang Seng shed 0.5 per cent to 23,580.29 and China’s Shanghai Composite eased 0.04 per cent to 2,205.77. Seoul’s Kospi was down 1.2 per cent to 1,993.78 and Australia’s S&P/ASX 200 retreated 0.4 per cent to 5,288.32.

Japan’s Nikkei 225 bucked the trend to rise 1.9 per cent to 15,365.60, boosted by a weaker yen.

In energy trading, benchmark U.S. crude for January delivery was down 11 cents at $93.74 a barrel in electronic trading on the New York Mercantile Exchange. The contract for December, which expired Wednesday, fell 1 cent to close at $93.33.

The euro was little changed at $1.3436. The dollar rose to 100.84 yen from 100.21 yen.