May 30, 2013 / 7:53 AM / 4 years ago

World stocks under pressure on Fed stimulus jitters

A trader gestures in front of screens at the Madrid bourse in Madrid May 28, 2013.Sergio Perez

LONDON (Reuters) - World shares were under pressure for a second day on Thursday and the dollar slipped against major currencies, in markets beset by doubts over when the U.S. Federal Reserve might slow its stimulus programme.

Top European stocks edged up 0.2 percent as they steadied after heavy falls on Wednesday, but another 5 percent dive in Japan's Nikkei in Asian trading left MSCI's world index at a three-week low.

"The market is being dominated by expectations of Fed tightening," said Daiwa securities economist Tobias Blattner. "German government bond yields have gone up quite significantly and after this massive rally equities are correcting to a certain extent."

Share gains in Europe were underpinned by mining stocks, which rose 1.8 percent as traditional safe-haven investment gold - which has fallen sharply this year as demand for riskier assets has risen - jumped more than 1 percent to a one-week high.

The U.S. job market and the economy as a whole may be strong enough in a few months to allow the Fed to pare its bond buying by a small amount, normally dovish Fed policymaker Eric Rosengren said on Wednesday.

Uncertainty over the timing of any shift left the dollar broadly weaker and hovering near a session low of 100.555 against the yen. The softer greenback saw the euro drift up to $1.2974 as it neared a two-week high.

European Commission sentiment data, due at 0900 GMT, will be a focus for investors looking for signs of a pickup following recent patchy surveys. German Chancellor Angela Merkel and French President Francois Hollande also meet ahead of a June EU summit.

In the debt market, German Bund futures recovered some ground after a recent sell-off.

But investors were also reluctant to place big bets before a sale of 5- and 10-year Italian bonds, amid signs that a 10-month fall in peripheral euro zone borrowing costs could be drawing to a close.

Commodity markets were also focused on the uncertain impact a scale-back in Fed support would have on the global economy and its demand for natural resources and for the dollar, which most raw materials are priced in.

London copper dropped to a two-week low of $7,205.50 bringing its fall this year to 9 percent, and oil dipped back towards $102, near the bottom of its recent range.

"This (Fed easing stimulus) is a very tricky issue. I don't think Fed chairman Ben Bernanke really wants to start tapering stimulus, but more and more policymakers are for it," said Joyce Liu, an investment analyst at Phillip Futures.

"It seems that every time there's a dip, people will start coming to the market to buy," Liu said about gold.

Additional reporting by Lewa Pardomuan in Singapore; Editing by John Stonestreet

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