Market update: A modicum of calm as investors await clues on Fed policy on Wednesday – 21.08.2013

Source: Henderson Global Investors

A degree of calm returned to the US interest rates markets on Tuesday. Bond yields retreated from two year highs prompted by safe haven buying as global stocks fell to their lowest levels in over a month on concerns for lack of liquidity to support the economy when the US Federal Reserve (Fed) begins to taper its stimulus programme. In contrast to global shares, stocks on Wall Street had a better day and halted their recent slide as major retailers reported better-than-expected earnings and outlook. The Dow Jones gained 0.1%, while the S&P 500 was up 0.4%.

Asian markets have delivered a mixed performance overnight and European shares are cautiously calmer this morning while markets await the release of the minutes of the Fed’s July meeting on Wednesday (7pm BST) to search for clues on the ‘timing’ of Fed tapering. In Asia, while Indonesian and Indian bourses recovered somewhat, the latter helped by Indian central bank’s moves to ease liquidity, Japanese shares were troubled by the latest incident at the Fukushima nuclear plant. The Nikkei 225 index, however, managed to rise from mid-session lows to close up 0.2%. At the time of writing European shares are softer; the FTSE Eurofirst 300 is down 0.1%, but investors are more nervous in London with the FTSE 100 down 0.4%.