Markets recover poise as Fed prepares to meet

Associated Press

LONDON (AP) — The mood in financial markets turned more upbeat Tuesday, following days of turmoil for stocks and emerging market currencies, despite expectations of a further monetary tightening from the U.S. Federal Reserve.

In recent days, investors have fretted about slower economic growth in China, the world's second-biggest economy, as well as the impact of political problems in countries like Argentina and Turkey.

"The rout that has rocked global equity markets in recent days appears to be drawing to a close," said Joao Monteiro, an analyst at Monex Capital Markets.

In Europe, the FTSE 100 index of leading British shares was up 0.4 percent at 6,579 while Germany's DAX rose 0.7 percent at 9,418. The CAC-40 in France was 0.8 percent higher at 4,177.

Wall Street poised for a solid opening, with Dow futures and the broader S&P 500 futures 0.5 percent.

Despite the calmer mood, traders remain jittery amid concerns that the turmoil may spread around emerging markets. Among those suffering are the Turkish lira, the Russian ruble and the Indian rupee.

Though Argentina's problems, which helped start the global rout, are largely to do with its own problems, the emerging markets are very much in focus at the start of this year as investors wonder how the Fed's policy to reduce its monetary stimulus impacts on them.

The Fed's stimulus, in its various guises, has helped shore up a number of emerging market currencies over the past few years as investors looked for higher returns.

Investors are awaiting the outcome of a two-day Fed meeting starting Tuesday that will be the final one chaired by Ben Bernanke before Janet Yellen takes over. The consensus in the markets is that the Fed will announce a further $10 billion reduction in its bond buying program to $65 billion as the U.S. economy continues to improve.

The more stable market mood began earlier in Asia. Though most stock markets posted losses, they were largely modest aside from Australia, where the main S&P/ASX 200 fell 1.3 percent to 5,175.10 as investors had an opportunity to catch up with global declines following a public holiday there.

Trading elsewhere was more restrained. Japan's Nikkei 225 fell 0.2 percent to 14,980.16 while South Korea's Kospi edged up 0.3 percent to 1,916.31. Hong Kong's Hang Seng lost 0.1 percent to 21,960.64 and the Shanghai Composite Index in mainland China rose 0.3 percent to 2,038.51.

In currency markets, the euro was down 0.3 percent to $1.3642 while the dollar rose 0.5 percent to 103.10 yen.

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