Global shares buckle as U.S. bond yields rise on Fed fears

Fri Aug 16, 2013 8:09am EDT
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By Richard Hubbard

LONDON (Reuters) - World shares headed for their biggest weekly fall in almost two months on Friday as investors set aside evidence of a broad global economic recovery and worried about an early end to the Federal Reserve's stimulus.

U.S. shares could see a slight recovery later according to stock index futures, though only after the Fed worries saw Wall Street post its largest one-day percentage drop since late June on Thursday .N.

The growing conviction that the U.S. central bank will scale back its bond buying next month was keeping pressure on U.S. government bond prices in European trade, driving up yields on benchmark 10-year notes and supporting the dollar.

"Given that the 10-year U.S. yields are headed towards 3 percent, we think the general direction is for a stronger dollar," said Tom Levinson, FX strategist at ING.

The benchmark 10-year Treasury note rose to 2.78 percent, edging back towards a two-year high of 2.823 percent touched in Thursday's volatile session.

Against a basket of major developed world currencies .DXY, the dollar was steady and traded at around 97.40 yen with the euro at $1.3340.

Emerging currencies though were struggling with India's rupee hitting a record lows beyond 62 per dollar, bringing its year-to-date losses to 11 percent. The Indonesian rupiah also tumbled to four-year troughs. <EMRG/FRX>

MSCI's broad emerging equities index .MSCIEF also fell for a second day, shedding 0.2 percent.   Continued...

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