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Global stock markets in steep falls after Fed comments Global stock markets in steep falls after Fed comments
(35 minutes later)
European stock markets have fallen sharply after the US central bank signalled it could begin to scale back its economic stimulus programme later this year. Global stock markets have fallen sharply after the US central bank signalled it could begin to scale back its economic stimulus programme later this year.
In late morning trade, the UK's FTSE 100 index, Germany's Dax and France's Cac 40 index were all down 2.4%. In afternoon trade, the UK's FTSE 100 index was down 2.4%, while Germany's Dax index and France's Cac 40 were down 2.68% and 2.77% respectively.
Earlier in Asia, Tokyo's Nikkei 225 had finished 1.7% lower while the Shanghai SSE index fell 2.77%. As markets opened in the US, the Dow Jones and S&P 500 indexes both fell 1%.
Markets were also hit by weak Chinese manufacturing data. The falls followed on from Wednesday's 1% market dip in US stocks.
On Wednesday, Federal Reserve chairman Ben Bernanke said that if the central bank's forecasts were correct, it could begin slowing down asset purchases by the end of 2013 and wind them down completely by the middle of 2014. Gold price hit
The Fed has been buying in bonds at a rate of $85bn (£54bn) a month, but believes it may be able to scale back as the US economy recovers. The markets were spooked after Federal Reserve chairman Ben Bernanke said that if the central bank's forecasts were correct, it could begin slowing down asset purchases by the end of 2013 and wind them down completely by the middle of 2014.
However, he emphasised that the programme was tied to how well the US economy was doing. The Fed has been buying bonds at a rate of $85bn (£54bn) a month, but believes it may be able to scale this back as the US economy recovers and end the programme next year.
Speculation However, Mr Bernanke emphasised that the programme was tied to how well the US economy was doing.
His comments spooked the US markets, with the Dow Jones Industrial Average falling more than 200 points, or 1%, to 15,112.19. His comments led to a widespread equity sell-off in the US on Wednesday, with the rest of the world following suit.
The S&P 500 closed 1.4% lower at 1,628.93, while the Nasdaq lost 1.12% to finish at 3,443.2.
Gold prices also suffered on Thursday, falling to two-and-a-half year lows, largely thanks to a strengthening dollar, as investors prepared for a tightening of US monetary policy.Gold prices also suffered on Thursday, falling to two-and-a-half year lows, largely thanks to a strengthening dollar, as investors prepared for a tightening of US monetary policy.
Up to now the Fed has been keeping interest rates at a record low range of between zero and 0.25%.Up to now the Fed has been keeping interest rates at a record low range of between zero and 0.25%.
The dollar rose by 0.76% against the euro and was up 1.39% against the yen. The dollar rose by 0.74% against the euro and was up 1.62% against the yen.
Bond markets were also affected as investors began a widespread sell-off, sensing an end to the era of central bank stimulus measures.Bond markets were also affected as investors began a widespread sell-off, sensing an end to the era of central bank stimulus measures.
Yields on German 10-year bonds rose 11 basis points to 1.67%, and two-year yields rose to 0.23%.Yields on German 10-year bonds rose 11 basis points to 1.67%, and two-year yields rose to 0.23%.
Elsewhere in Europe, Italian 10-year bond yields rose 25 basis points to 4.51%, while Spanish equivalents were up 30 basis points to 4.83%.Elsewhere in Europe, Italian 10-year bond yields rose 25 basis points to 4.51%, while Spanish equivalents were up 30 basis points to 4.83%.