Global Markets Shares jittery over U.S. stimulus, BOJ talk crops yen

by **hlk** Tue 03 Dec 2013, 19:55

Business & Markets 2013
Written by Reuters
Tuesday, 03 December 2013 18:56
A + A - Reset
03/12/13 18:33:19
* Yen tumbles to 6-month low vs dollar on BOJ speculation
* Nikkei hits highest close in 6 years
* Aussie dollar edges to near 3-month low after RBA comments
* Gold stabilises after 2.6 pct slide overnight on strong U.S. data
* European shares seen opening modestly lower
LONDON (Dec 3): World shares fell for a second day and gold was near a
five-month low on Tuesday, as concern the U.S. will soon scale back its
economic stimulus offset reports that Japan would ramp up its own stimulus.
Upbeat U.S. economic data on Monday suggested the Federal Reserve is
tilting towards reducing its bond-buying programme. Then signs the Bank of
Japan will shovel more cheap money into its economy saw the yen slide and
pushed Japanese stocks towards a six-year high.
European shares opened in no such mood, however. A drop of 0.6 percent took
their losses for the week to 1 percent, as investors looked ahead to Thursday's
ECB and BoE meetings and Friday's key U.S. jobs data.
The euro was hovering at just over $1.35 and at a 5-year high versus the yen.
Portugal's plans for a debt swap to get in shape for a possible return to
borrowing markets next year dominated attention in bond markets.
"It is going to be interesting to see how the market reacts to Portugal's debt
exchange," said Suvi Kosonen, a fixed income analyst for Nordea in Helsinki.
"Most of the market attention, though, is already turning to the ECB on
Thursday and the U.S. non-farm payrolls in the U.S. on Friday."
The interest in Portugal's debt swap meant Lisbon's stock market and the country's government bonds were virtually the only ones in
Europe to sidestep losses.
Ukraine also remained in focus after massive protests against President Viktor Yanukovich's decision to move away from Europe towards
Russia. Ukrainian financial markets got hammered on Monday amid talk of a currency crisis.
Despite the turmoil, Yanukovich left Ukraine on Tuesday for a state visit to China.
Central Banks
Investors otherwise remained fixated on Federal Reserve's plans for winding down the stimulus programme that has helped drive this
year's huge rally in global risk assets.
U.S. 10-year Treasury yields, the benchmark for the world's borrowing costs, were hovering just under the high of 2.8 percent they hit on
Monday after global data signalled world growth was still gathering steam. The U.S. Institute for Supply Management's index of national factory activity rose in November to its best showing since April 2011. Hiring
also accelerated.
Friday's nonfarm payrolls report is expected to offer more clues as to when the Fed will start reducing its monthly $85 billion bond
purchases.
"A drop in the unemployment rate from 7.3 percent to 7.0 percent would fan tapering fears, preventing U.S. Treasuries from reversing
course even on a lacklustre 150k NFP," Societe Generale said in a note.
With the U.S. Treasury yields moving higher, so did the appeal of the dollar. It hit a six-month high of 103.38 yen and sat just short of a 4
1/2-year high reached in May. The yen was also weighed down by the speculation that the Bank of Japan may expand its already massive
stimulus.
According to officials briefed on the process, the bank is looking to go beyond its $70 billion-a-month bond-buying programme. Options
include major purchases of stock-market-linked funds or other assets riskier than Japanese government bonds, the insiders said.
Aussie Dollar Down
Despite robust export numbers and strong retail data, the Australian dollar dropped towards a three-month low after the Reserve Bank of
Australia left rates on hold and said the currency was "still uncomfortably high."
Gold, meanwhile, traded near a five-month low amid the fears of an early end to Fed stimulus, and the metal looked vulnerable to further
declines with the jobs data looming.
Spot gold saw a small rebound to $1,222 an ounce in early trading in London following Monday's 2.6 percent fall, but it remained close to
its lowest levels since early July.
U.S. crude prices gained 0.2 percent to around $94 a barrel, adding to a 1.2 percent rise overnight. Brent inched up to $111.50.