By Ellen Freilich
NEW YORK (Reuters) - Global equities markets and the dollar fell on Wednesday, reviving a bid for battered safe-haven U.S. debt as signs of strength in the U.S. economy fanned fears the Federal Reserve may soon begin tapering its massive stimulus program.
On Wall Street, cyclical shares led stocks lower as investors continued to question the longevity of the stimulus and worried that less stimulus could lead to less growth.
The Dow Jones industrial average was down 93.66 points, or 0.61 percent, at 15,315.73. The Standard & Poor's 500 Index was down 10.44 points, or 0.63 percent, at 1,649.62. The Nasdaq Composite Index was down 18.57 points, or 0.53 percent, at 3,470.32.
Fear that the Fed would start to curb the amount of its purchases of Treasuries have cut prices of U.S. Treasuries and propelled yields sharply higher. Benchmark Treasury note yields hit a peak of 2.235 percent, its highest since April 2012, before easing to 2.17 percent early Wednesday.
In Europe, the FTSE Eurofirst 300 index of top shares has dropped 1.67 percent, giving back all of the previous day's 1.3 percent gain and then some.
Financial markets have seen a rise in volatility since Fed chairman Ben Bernanke last week suggested the central bank could begin to roll back its $85 billion-a-month fund injection.
Some investors are avoiding taking big positions as they weigh the strength of a nascent recovery in the global economy against the withdrawal of stimulus.
In fixed income markets, yields on both safer German and U.S. bonds have risen along with those from riskier sovereign issuers, as nervous investors cut back positions.
Traders said the weakness in equity markets had encouraged investors to buy the yen, which is seen as a safe haven, sending the dollar down 1.4 percent to a low of 100.96 yen.
The fall pushed the greenback 0.5 percent lower against a basket of other major currencies as it slipped further away from a 3-year high of 84.50 hit on May 23.
Japan's Nikkei index also bucked the trend in world equity market, ending 0.1 percent higher. The MSCI's world equity index, which tracks shares in 45 countries, posted a 0.55 percent decline on the day.
Many analysts still believe the growth momentum implied by Tuesday's strong figures for U.S. home prices and consumer confidence should ultimately be good for markets but fear the current volatility could continue for some time.
"We've got the (U.S.) payroll figures next week and then all the way though June the market is going to be very sensitive leading up until to the next FOMC (Fed policy) meeting," Michael Gallagher, managing director at IDEAglobal, said.
GLOBAL GROWTH TRIMMED
The concerns over the Fed easing its stimulus effort came as the Organisation for Economic Cooperation and Development (OECD) underlined the risks still facing the world economy by cutting its 2013 global forecast to 3.1 percent, from 3.4 percent.
The United States and Japan were seen driving growth, due to their massive monetary easing efforts, but the ongoing recession in the euro zone and a slowdown in China are weighing on the global economy, the OECD said.
However, data out of the euro zone on Wednesday did bolster hopes the European Central Bank could extend its loose monetary policy at its rate-setting meeting next week.
The ECB said loans to the euro area's private sector contracted for the 12th month in a row in April, while separate data showed German unemployment rose unexpectedly in May.
In the commodity market these global growth concerns and the weaker dollar dragged on copper and platinum, while Brent oil slipped under $104 per barrel.
"The market expected a pick up of the global economy this year, but it looks like there will only be a gradual restart to acceleration in the second half, so it seems the tipping point is moving further into the future," said Andy Sommer, analyst at EGL in Switzerland.
Source: http://news.yahoo.com/shares-fall-bonds-rise-data-fans-fed-uncertainty-161039733.html
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