World stocks fluctuate as uncertainty over Fed stimulus phase-out continues to rattle markets

BANGKOK – World stock markets fluctuated Monday, weighed down by uncertainty over whether a phaseout of the Federal Reserve’s monetary stimulus program is imminent.

In early European trading, Germany’s DAX fell 0.3 per cent to 8,391.48. France’s CAC-40 lost 0.7 per cent to 4,040.91. Markets in Britain were closed for a holiday. Wall Street also looked set for losses, with Dow Jones industrial futures falling 0.1 per cent to 14,970. S&P 500 futures lost 0.1 per cent to 1,659.80.

Data released Friday that showed a drop in new home sales raised questions about the strength of the recovery in the U.S. housing market, a key piece of the overall economy. That led to speculation that the Fed might stick with its current monetary stimulus or only reduce it very gradually.

The Fed has been mopping up government bonds and securities to the tune of $85 billion a month. That has held down long-term interest rates and made more money available for lending.

Recent data pointing toward an improved economy has led to speculation that the Fed would begin phasing out the program as early as next month. But the plunge in home sales caused some analysts to rethink their assumption that the Fed would start “tapering” in September.

“I still think it will start but the amount will be minimal,” said Andrew Sullivan at Kim Eng Securities in Hong Kong.

Asian stock markets outside of Japan were mostly higher. Daniel Martin of Capital Economics in Singapore said he believes the markets were mostly rebounding from an aggressive sell-off last week and not the housing data released Friday.

“I don’t think markets revise their views on tapering from one piece of data,” he said. “There will come a point very soon, if it hasn’t already happened, when investors realize that tapering won’t be some kind of huge disaster.”

Hong Kong’s Hang Seng rose 0.7 per cent to 22,005.32. South Korea’s Kospi advanced 1 per cent to 1,887.86. Australia’s S&P/ASX 200 gained 0.2 per cent to 5,135.40.

Japan’s Nikkei 225 retreated by 0.2 per cent to close at 13,636.28. Benchmarks in mainland China, India, Taiwan, New Zealand and Thailand also rose. Indonesia fell.

Among individual stocks, embattled utility Tokyo Electric Power. Co plunged nearly 7 per cent in the aftermath of a radioactive water leak at the Fukushima Dai-ichi crippled nuclear power station.

Benchmark oil for October delivery was up 8 cents to $106.48 per barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1.39, or 1.4 per cent, to close at $106.42 on Friday.

The euro fell to $1.3369 from $1.3386 late Friday. The dollar fell to 98.48 yen from 98.71 yen.