Shares fall as Fed officials talk of QE exit

LONDON: The dollar held firm near a 10-month high versus a basket of
currencies on Friday and European shares fell after a regional Federal
Reserve chief said the U.S. central bank may begin to taper its asset
buying this summer.
European shares <.FTEU3> were down 0.2
percent at 1,242.49, edging further back from five-year highs and
following a retreat in Asian stocks and Thursday's late fall on Wall
Street, but still on track for a weekly gain.
"The stock market is driven by liquidity and sooner or later this must end," KBC senior economist Koen De Leus said.
"In
the near-term a correction would be healthy, but on the whole the
market is (still) well supported by the huge amount of liquidity that
is pumped into the system by the central banks."
In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> fell 0.4 percent to 479.33.
The
German Bund future slipped at the open as some investors booked profits
after this week's gains, but expectations central bank policies will
remain ultra-easy for months limited losses.
The Bund future
FGBLc1 was 4 ticks lower at 145.27 compared with 145.31 at Thursday's
settlement, while the dollar rose 0.4 percent to 83.944 <.DXY>
versus its currency basket, close to this week's 10-month high of
84.094.
The Fed's quantitative easing program has helped
stabilize the world's largest economy and sent investors scrambling for
returns, suppressing bond and cash yields, inflating asset prices and
fuelling a global rally in stocks.
San Francisco Federal Reserve Bank President John Williams said on Thursday the Fed could begin easing its monetary stimulus this summer and end bond buying late this year.
Although
Williams does not have a vote in the Fed's policy-setting panel this
year, his comments weighed on U.S. shares, which have soared to record
highs this year, in part because of the Fed's purchases of $85 billion
a month in bonds.
A trio of hawkish regional Federal Reserve
officials meanwhile called for the U.S. central bank to stop buying
mortgage-backed bonds, citing a recent improvement in the housing
market.
"The Fed realizes the impact that (QE) has on markets
and the potential negative impact on risky assets. Therefore they try
to prepare the markets a bit for an eventual end," said BNP Paribas Fortis Global Markets head of research Philippe Gijsels. - Reuters