Global shares slump as Fed signals end to stimulus

 

Bonds, shares and commodities fell sharply around the world on Thursday and the dollar rose after the US Federal Reserve explicitly signalled an end to easy money and data showed China's economy slowing down.

 

The sell-off began after Fed chairman Ben Bernanke confirmed that US economic growth was strong enough to begin tapering back on its $85 billion in monthly asset purchases later this year.

 

"Bernanke came across as being quite clear and I think people were hoping for a less clear cut path to higher rates and that came as a little bit of shock to the market," Said Luca Jellinek, head of European interest-rate strategy at Credit Agricole.

 

Ten-year US Treasury note yields hit 15-month highs of about 2.38 % after the comments, lifting the dollar against a broad range of currencies and sparking slump in global equity markets.

 

The selling accelerated when a survey of China's factories showed activity slumping to a nine-month low just as a squeeze in the nation's money markets sent short term rates to record highs.

 

Among a host of unwanted milestones, Asian stocks outside Japan suffered their biggest daily loss since late 2011, German Government bond futures dropped to their lowest levels since February and oil slumped by around $1.50 a barrel.

 

The prospect of higher US rates ahead added momentum to sell-offs across emerging markets, sending MSCI's benchmark index 3 % lower. While in Asia currency falls sparked intervention from central banks in India and South Korea.

 

In Europe the broad FTSEurofirst 300 index, which only last month hit a 5-1/2 year high, was down by 1.5 % in early trade, while the euro zone's blue-chip Euro STOXX 50 index fell 2 %.