PARIS - Investors took to the sidelines Tuesday, a day ahead of a key policy decision from the U.S. Federal Reserve that may see the central bank reduce its massive monetary stimulus.
On Monday, stocks in Europe and the
U.S. recorded big gains despite growing speculation that the Fed will decide to
start tapering its $85 billion worth of financial asset purchases following the
conclusion of its two-day meeting on Wednesday.
Though a withdrawal would represent a
sign that the U.S., the world's largest economy, is strong enough to survive
without the purchases, investors are wary. After all, the Fed's stimulus, in
its various guises over the past few years, has helped shore up stock markets
around the world over the past few years.
In Europe, France's CAC-40 fell 0.9
percent to 4,081, while Germany's DAX was down 0.4 percent to 9,124. The FTSE
index of British shares pulled back 0.5 percent at 6,492.
Ahead of Wall Street's opening, futures
were muted. Dow Jones industrial futures were flat at 15,818. S&P 500
futures fell 0.1 percent to 1,779.
The key piece of economic news later
will likely be U.S. inflation figures for November. If price pressures remain
benign, then it may encourage the Fed to maintain its current level of bond
"Low inflation is the only reason
why some investors believe the Fed won't taper tomorrow, with the rest of the
data over the last couple of months clearly showing that the economy is
improving," said Craig Erlam, market analyst at Alpari UK.
Elsewhere, energy prices fell,
potentially over concerns that economies would sputter if the Fed tapers. Crude
oil lost 23 cents to trade at $97.25 a barrel.
But in a sign of how difficult it is
for markets to guess what the Fed might do -- and what it will mean for the
world economy -- the euro remained firm against the dollar, trading up slightly
at $1.3774 and not far off its year's high.
Asian stocks were also mixed. Japan's Nikkei 225 closed 0.8 percent up at 15,278.63. Hong Kong's Hang Seng slid 0.2 percent at 23,069.23. China's Shanghai's Composite fell 0.5 percent at 2,151.08. Australia's S&P/ASX 200 inched up 0.3 percent at 5,103.20.
Markets were up in Southeast Asia, led
by the Philippines. The Philippine Stock Exchange index climbed 2 percent to
5,928.99. The Philippine economy may grow 7 percent this year -- the upper end
of government's 6 percent to 7 percent target -- despite devastation in central
regions due to a powerful earthquake and Typhoon Haiyan, Economic Planning
Secretary Arsenio Balisacan said.