Markets subdued ahead of Fed minutes

Investors chat in front of the stock price monitor at a private securities company in Shanghai, China, Wednesday, Aug. 21, 2013. Asian stock markets were choppy Wednesday as traders waited for hints from the U.S central bank about when it will begin to reduce its massive stimulus effort. (AP Photo)
STR

LONDON Markets were subdued Wednesday ahead of the publication of the minutes to the last policy meeting of the U.S. Federal Reserve, which could provide further insights as to when the central bank will start reducing its monetary stimulus.

The Fed is currently buying $85 billion a month in financial assets in order to help keep U.S. interest rates down and spur borrowing and investment. Over recent months, the U.S. economic data has been strong enough to convince Fed officials that a reduction in the stimulus is merited soon. The consensus in the markets is that the so-called tapering will begin in a month, after the next Fed policy meeting, though that view is not unanimous.

"Volumes and volatility will probably remain low until the minutes are released," said David Madden, market analyst at IG.

In Europe, Germany's DAX fell 0.3 percent to 8,277 while the CAC-40 in France was 0.2 percent lower at 4,023. The FTSE 100 index of leading British shares was down 0.7 percent at 6,405, underperforming its peers because HSBC PLC has gone ex-dividend.

Wall Street was poised for a lower opening too, with Dow futures and the broader S&P 500 futures 0.3 percent lower.

Aside from the minutes, which are published half way through the U.S. trading session, investors will have the monthly existing home sales figures from the National Association of Realtors to digest. One reason why the Fed tapering expectations have ratcheted up in recent months has been the improvement in the U.S. housing market.

Global markets have been shaky this week as traders worried about a pullback in the Fed's bond purchases. The Dow, for example, has posted a five-day sequence of losses for the first time this year, while U.S. bond yields have risen to their highest levels since 2011. Money has also flowed out of emerging stock markets, denting the currencies and stock markets of countries such as Malaysia, Indonesia and India.

Trading in the currency markets was fairly lackluster ahead of the minutes. The dollar's near-term performance is likely to hinge on when the Fed decides to start tapering its stimulus. The euro was down 0.2 percent at $1.3394 while the dollar rose 0.2 percent to 97.48 yen.

"What is certain is that this week's price action, not only in equity markets, but bond markets as well has served to highlight how uncertain the markets are," said Michael Hewson, senior market analyst at CMC Markets.

Earlier, Asian stock markets traded unevenly. Japan's Nikkei 225 index ended 0.2 percent higher at 13,424.33 while South Korea's Kospi fell 1.1 percent to 1,867.46. Hong Kong's Hang Seng lost 0.7 percent to 21,817.73.

Indonesia's benchmark index rose 1.1 percent after dropping over 8 percent over the first two days of the week on concerns over the Fed policy.

Oil prices tracked equities lower, with the benchmark New York rate down 46 cents at $104.65 a barrel.