European share prices fell yesterday to register the first quarterly loss in a year and first monthly loss since May last year, as investors worried about when central banks would stop pumping money into the markets.
The pan-European FTSEurofirst 300 index reversed early gains to close 0.5 per cent lower at 1,152.17 points yesterday, a 5.3 per cent drop for the month, hit particularly hard last week after the US Federal Reserve laid out a possible timetable for turning down the taps on its $85 billion-a-month bond-buying programme.
Concerns over the programme were reignited yesterday by Fed official Jeremy Stein, who said the central bank should take a long-term view that the labour market is improving when it meets in September even if jobs data disappoints, perhaps bolstering the case for withdrawing some of the monetary stimulus by summer’s end.
“Stein spoke very hawkishly... and since that we’ve seen the market has dropped off,” Mark Foulds, sales trader at ETX Capital, said.
“People do still see value, but the problem is that so much of it is still dependent on talk over whether the Fed will continue with its stimulus or slow it imminently.”
The FTSEurofirst managed its first weekly gain in six weeks and its best weekly performance since mid-April, after a week which has seen several Fed officials play down the idea that it might be about to tread on the monetary brakes.
However Stein’s comments bucked that trend, and a bag of mixed economic data from the US kept trade choppy and the picture for the future of the so-called quantitative easing programme far from clear.
The volatility of the session was exacerbated by thin volumes as investors were reluctant to take firm positions ahead of the opening of a new quarter.
“We are at the end of a week, month, quarter and half. So here may be an element of... holding off until next week which sees what is likely the most important piece of US data to affect both sentiment on QE3 (quantitative easing) as well as Fed policy – US Non-Farm Payrolls and Unemployment,” Mike van Dulken, head of research at Accendo Markets, said in a note.
The Stoxx Europe 600 technology sector index led sectoral fallers yesterday, down 1.5 per cent, led lower by a 3.8 per cent drop in Nokia. (Reuters)