May.23 - Concern the U.S. Federal Reserve's may scale back its monetary stimulus and weak Chinese factory data trigger a sharp selloff in world share markets and sends assets perceived by investors as safe haven, like the Japanese yen and German bonds, higher. Ciara Sutton reports
Markets in a tailspin as concerns the U.S. Fed could taper its stimulus programme spooked investors. Indices fell sharply after chairman Ben Bernanke announced the central bank could scale back the pace of bond purchases. Investors feared the move could jeopardise the global economic recovery. Europe's FTSEurofirst 300 was down almost 2% mirroring the CAC, the DAX and the FTSE100 Banks and miners - sectors most exposed to the broader economy - saw the biggest declines. Baader Bank's Robert Halver. (SOUNDBITE) (German) HEAD OF BAADER BANK'S CAPITAL MARKET ANALYSIS, ROBERT HALVER, SAYING: "The stock market right now depends almost 100 percent on the monetary policy and in the United States, they don't seem to know what they want, whether to pump in more money or not. The markets are unsettled which means that the monetary policy makers need to be careful about what they say." The losses were compounded by weak manufacturing data from China. Asian markets bore the brunt. Japan's Nikkei index closed down over 7 percent - its biggest drop for more than 2 years. And Singapore's stocks had their worst daily decline in a year. Tobias Blattner from Daiwa Capital Markets. (SOUNDBITE) (ENGLISH) TOBIAS BLATTNER, EUROPEAN ECONOMIST AT DAIWA CAPITAL MARKETS, SAYING: "All of the global developments I think in the markets right now are purely liquidity-driven. They are not any longer I think underpinned by fundamentals in particular here in Europe of course, but I think also elsewhere in the global economy. So I think we must live in that kind of environment, we must live with that kind of volatility that we have seen overnight." Markets have been riding high in recent months - the FTSEurofirst 300 closed at its highest for five years on Tuesday. And shares in London have also hit 13-year highs in recent days, with losses only now placing the FTSE 100 at a one-week low.