World Markets Fall on Fed Uncertainty, Wall Street Selloff

wall street preview world markets federal reserve bond buying
Richard Drew/AP

BANGKOK -- Uncertainty about the U.S. Federal Reserve's next course of action and a sharp, sudden plunge on Wall Street sent global stock markets lower Monday.

The Federal Reserve is spending $85 billion a month on buying bonds to push down interest rates in hopes of spurring borrowing and spending. That has propelled investors into stock markets over the past months, in search of higher returns. But recent positive U.S. economic data has sparked concerns that the Fed might scale back on its bond buying in the coming months.

European stocks opened sharply lower, echoing U.S. stock market losses Friday, when the Dow dropped more than 200 points, its worst drop in six weeks.

Britain's FTSE 100 fell 1.9 percent to 6,531.84. Germany's DAX fell 1.3 percent to 8,240.14. France's CAC-40 lost 1.1 percent to 3,906.99. However, U.S. stock market futures refused to buckle after posting sharp losses. The Dow Jones industrial average (^DJIA) rose 0.3 percent to 15,146. The S&P 500 index (^GSPC) advanced 0.2 percent to 1,631.80.

Japan's Nikkei 225 index plummeted 3.7 percent to 13,261.82, weakening as the Japanese currency posted gains against the dollar, a currency movement seen as negative for Japan's exporters since their products become more expensive when sold overseas.

South Korea's Kospi fell 0.6 percent to 1,989.57. Australia's S&P/ASX 200 fell 0.8 percent to 4,888.30. Benchmarks in Indonesia, Singapore, the Philippines, Taiwan and mainland China also fell.

Analysts at Credit Agricole CIB in Hong Kong said that "the background is set for a further increase in uncertainty and market volatility this week."

Hong Kong's Hang Seng shed early gains to fall 0.5 percent to 22,282.19 after a report showed China's manufacturing activity shrank more than expected. HSBC's monthly purchasing managers' index, released Monday, fell to 49.2 in May. That's down from 50.4 in April. Analysts had expected the May level to come in at 49.6. Readings below 50 indicate a contraction.

A similar survey released Saturday found manufacturing ticked up slightly. That report by the government-sanctioned China Federation of Logistics and Purchasing found manufacturing edged up to 50.8.

Among individual stocks, Australia's Cochlear plunged more than 18 percent after the hearing implant maker reported slowing growth this year.

Some Japanese exporter shares were battered. Sony Corp. (SNE) fell 5.4 percent. Mazda Motor Corp. tumbled 7.2 percent.

Benchmark oil for July delivery fell 16 cents to $91.81 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.64 to close at $91.97 a barrel on the Nymex on Friday.

In currencies, the euro rose to $1.3017 from $1.2981 late Friday in New York. The dollar fell to 100.27 yen from 100.69 yen.

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