Market update: European stocks inching back into positive territory, Fed taper concerns linger – 04.12.2013

Source: Henderson Global Investors

Wall Street stocks slipped again on Tuesday (Dow Jones -0.6%, S&P 500 -0.3%) as the consolidation in equities continued. However, the declines followed record gains for eight consecutive weeks for both the indices. Bouts of profit taking to cash in the gains, and increasing concerns for the tapering of US$85bn-a-month bond purchases by the US Federal Reserve (Fed) are contributing to the risk-averse sentiment. Additionally, signs of a weak holiday shopping season led US retail and consumer discretionary stocks down, despite stronger-than-expected November auto sales.

Asian trading overnight has been mixed but generally weaker on similar grounds. The declines were led by a 2.2% fall in Japan’s export-sensitive Nikkei 225 after the yen strengthened versus the US dollar, and amid comments from a Bank of Japan board member that further easing would be counterproductive. Chinese stocks benefited from news that the central bank will implement Shanghai Free Trade Zone reforms within three months, boosting companies that would benefit from financial liberalisation (Shanghai Composite 1.3%). Trading in European bourses this morning is beginning to firm up. At the time of writing the FTSE Eurofirst 300 was flat with the FTSE 100 inching its way up by 0.1%, as investors await further economic data releases from the US for the rest of week that could shed light on the timing of Fed tapering.