Global shares stumble as recovery signs stir stimulus worries

Mon Aug 12, 2013 8:41am EDT
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By Marc Jones

LONDON (Reuters) - World stocks headed for their fifth fall in six sessions on Monday and safe-haven assets including the dollar, gold and the Swiss Franc made gains, as signs of economic recovery pointed to cuts in stimulus.

Signs that China's slowdown may have run its course and expectations that data this week will point to the euro zone pulling out of its longest recession on record are bolstering hopes that the global economy is gaining strength.

But at the same time investors are becoming jittery that the better outlook means major central banks such as the U.S. Federal Reserve will begin scaling back the support that has driven the sharp rally in markets over the last few years.

U.S. stocks were expected to open down 0.1-0.3 percent when Wall Street resumes. Last week they posted their biggest weekly decline since June as comments from Fed policymakers sparked renewed talk of stimulus withdrawal.

European shares quickly lost the positive momentum China data had provided to Asian markets and by 0800 ET Britain's FTSE 100 .FTSE, Germany's DAX .GDAXI and Paris's CAC 40 .FCHI were down 0.2-0.3 percent, still within touching distance of last week's 2-1/2 month high.

Analysts cautioned that holiday-thinned trading was amplifying the moves and that many investors were likely to be biding their time for the week's headline data releases on Tuesday and Wednesday.

"I suspect today there is a bit of keeping one's powder dry ahead of these market moving pieces of economic data," said IG Index strategist Alastair McCaig.

"You kind of imagine tonight's U.S. federal budget comments could easily get railroaded into being an interpretation of the potential tapering of (Fed) QE and on Wednesday we have some pretty important European GDP figures."   Continued...

Workers speak above an electronic information board at the London Stock Exchange in the City of London January 2, 2013. REUTERS/Paul Hackett