Global shares slide ahead of U.S. data crunch

Wed Dec 4, 2013 7:36am EST
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By Marc Jones

LONDON (Reuters) - World shares fell for a third day on Wednesday and gold dropped to a five-month low, as focus returned to whether the U.S. Federal Reserve will start to wind down its bond-buying stimulus as soon as this month or next.

The to-and-fro of when the Fed will begin to halt the flow of cheap dollars has dominated trading worldwide for months. A run of data ending in the main U.S. jobs indicator - non-farm payrolls - on Friday may yet tip the balance again.

Polls of analysts and traders still point firmly to the U.S. central bank holding fire until next March but some stronger data has reheated speculation it could move earlier.

That prompted investors to cash in gains from recent rallies, and despite a steadier start European stocks .FTEU3 were on the slide again by midday after suffering their biggest tumble since August on Tuesday.

Still, Johan Jooste, head of fund manager Julius Baer's London investment office said it wasn't necessarily the start of the Fed's withdrawal that would drive the market's reaction.

"The whole market has been focused on when tapering will start, but what I would ask (incoming Fed chief) Janet Yellen is when does she perceive it ending.

"If the Fed starts in Jan or March I'm not so sure that's necessarily the big deal, but it's a bigger deal if it ends it quickly," Jooste added.

The worry is that the reduction in Fed support will be like a stab with a pin for recently inflated asset prices.   Continued...

An electronic information board is seen at the London Stock Exchange in the City of London October 11, 2013. REUTERS/Stefan Wermuth