Global shares, dollar dip with Fed timing still dominating

Thu Aug 15, 2013 8:17am EDT
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By Richard Hubbard

LONDON (Reuters) - World shares edged lower and the dollar softened on Thursday as uncertainty over when U.S. Federal Reserve will begin cutting its monetary stimulus offset a brighter economic picture in Europe.

A barrage of data on the health of the U.S. labor market, manufacturing and consumer price inflation due later could clarify the outlook though share index futures pointed to further falls for Wall Street ahead. .N

"If we get good data... then it might boost thinking that tapering is coming in sooner rather than later," said Chris Beauchamp, equity analyst at IG Index.

Financial markets have largely positioned for the Fed to start paring its monthly $85 billion spending on bonds in September but conflicting signals from policymakers and muted inflation data lately have undermined this conviction.

On Wednesday, St. Louis Fed President James Bullard cited the inflation outlook when he said he hadn't decided whether next month's policy meeting would be too soon to curb the asset purchases, known as quantitative easing or QE. [ID:nL2N0GF1A4] [ID:nL2N0GE1C1]

"Markets were absolutely convinced we would see about a 20 percent reduction in the run rate of QE in the September meeting," said Mike Ingram, market commentator at BGC.

In response to Bullard's comments and the weak reading for U.S. producer price inflation, the dollar at one point on Thursday tumbled about 0.5 percent against the Japanese currency to a low of 97.63 yen. It later settled at around 98 yen, to be just 0.1 percent lower.

The greenback's fall was exacerbated by Japanese government efforts to stamp out talk of corporate tax cuts which might have helped boost the world's No. 3 economy.   Continued...

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