Global stocks slide amid emerging markets sell-off

Thu Jan 30, 2014 6:39am EST
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By Toni Vorobyova

LONDON (Reuters) - Global equities hit 2-1/2 month lows on Thursday after the U.S. Federal Reserve pushed ahead with reducing stimulus, raising concern about more emerging markets weakness and pushing investors towards safe-haven bonds.

The Fed trimmed its monthly bond-buying program by $10 billion and made no mention of the turbulence in emerging markets which some investors had thought might delay the widely-flagged policy move.

The prospect of a steady withdrawal of stimulus coupled with improving economies in the developed world has attracted funds away from many emerging markets, particularly those with current account deficits or political troubles - or a combination of the two.

"I think there is a lack of positive triggers right now, and there is a growing concern about what happens. It's no 1998 ... we have a very cautious stance on all emerging market equities and currencies at the moment," said Hans Peterson, global head of investment strategy at SEB Private Banking.

"If you have weak fundamentals and liquidity is a little bit tighter that always shows, but it's the weak fundamentals that are really the issue, not liquidity."

With Brazil, Turkey, South Africa and India all holding elections this year, policymakers are likely to be wary of hiking rates too much to avoid damaging economic growth.

The vulnerabilities in the emerging world were noted by the Reserve Bank of New Zealand when it decided to hold off on raising interest rates on Thursday.

The MSCI All-Country World share index .MIWD00000PUS fell 0.4 percent to 391.22 points, hitting its lowest levels since early November and taking its losses for January so far to 4.2 percent - on track for its worst month in 1-1/2 years.   Continued...

An office worker walks past the board of the Australian Securities Exchange building displaying its logo in central Sydney April 5, 2013. REUTERS/Daniel Munoz