LONDON - Financial markets were sluggish Wednesday as investors remained focused on the prospect of a reduction in the U.S.'s monetary stimulus.An apparent budget deal in the U.S. Congress failed to have much of an impact even though it would mean another partial shutdown of the U.S. government will be avoided. Most interest rests on the U.S. debt ceiling, which has to be raised early next year to avoid a debt default.
A week ahead of the next policy
meeting of the Federal Reserve, investors appear to be holding back from making
big trading decisions.
Following a run of solid economic
data, particularly with regard to the labor market, there's a growing
expectation in the markets that the Fed will decide to start reducing its $85
billion worth of financial asset purchases.
However, any so-called tapering is
expected to be accompanied with a renewed commitment to keep interest rates
low. That, analysts say, helps explain why investors have held their nerve in
"It appears that the market is no
longer thinking that tapering equals tighter monetary conditions," said
Kathleen Brooks, an analyst at Forex.com.
In Europe, the FTSE 100 index of
leading British shares was up 0.3 percent at 6,541 while Germany's DAX rose 0.2
percent to 9,137. The CAC-40 in France was 0.7 percent higher at 4,121.
Wall Street was poised for a flat
opening, with little economic news scheduled expected. Dow futures and the
broader S&P 500 futures were both down 0.1 percent.
There was an equally subdued tone in
the currency markets, with the euro flat at $1.3763 and the dollar 0.4 percent
lower at 102.49 yen.
Earlier in Asia, the mood was a bit
more downbeat. Japan's Nikkei 225 closed down 0.6 percent at 15,515.06. Hong
Kong's Hang Seng tumbled 1.7 percent to 23,338.24 and China's Shanghai
Composite shed 1.5 percent to 2,204.17.