World shares fell for a third day today and gold was at a five-month low, with focus back on the risks of the US Federal Reserve starting to trim its bond-buying economic stimulus as soon as this or next month.
The to-and-fro of when the Fed will begin to halt the flow of cheap dollars has dominated trading worldwide for months and a run of data ending in the main US jobs indicator - non-farm payrolls - on Friday may yet tip the balance again.
Polls of analysts and traders still point firmly to the US 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, although European stocks saw a steadier start after suffering their biggest tumble since August yesterday.
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.”
A sharp 2.2 per cent fall for the Nikkei in Tokyo left MSCI's world share index down 0.3 per cent on the day.
The Dublin market was down 10 point to 4,395.81 this morning.
The dollar retreated against the yen and a basket of currencies in the FX market as traders used the uncertainty to lock in some of their recent profits on the greenback.
Benchmark US treasury yields edged back toward 2.8 per cent in early European trading. Wall Street, however, was expected to see a small rebound after the Dow Jones industrial average the S&P 500 Index dropped yesterday.
Ahead of the European Central Bank’s meeting tomorrow, mixed euro zone PMI data reinforced the differing fortunes of its main economies, though having only cut rates last month additional measures from the bank look unlikely for now.
One of Europe’s best performing economies is currently the UK, but high-flying sterling saw its wings clipped as growth in Britain’s service sector slowed a little last month, breaking a run of upside data surprises.
