BANGKOK (AP) -- Global stock markets sagged Monday as traders weighed the consequences of an anticipated phasing out of the U.S. central bank's unprecedented stimulus.
The Federal Reserve has been aggressively buying government bonds to push down interest rates and return employment to normal levels after millions lost jobs in the recession that followed the 2008 financial crisis.
The Fed says the program has helped stimulate the economy by making it easier to buy homes and invest in businesses. The Fed has also said the program is not indefinite and will be phased out when the economy improves.
Recent economic data and public statements by Fed policymakers have led investors to conclude that the Fed will begin winding down its $85 billion a month in bond purchases starting as early as September. Falling bond yields in the U.S is one sign that traders believe the Fed's move is imminent.
But analysts said a sharp increase in the cost of credit could stifle growth, which will make the transition tricky and could make stock markets shaky.
"If it looks like the removal of funding is having too much of an adverse effect on the local economy it (the Fed) will have to step back in; or the more likely scenario, it will extend the timeframe for the complete removal of monetary stimulus," said Evan Lucas of IG in Melbourne, Australia.
In early European trading, Britain's FSTE 100 fell 0.3 percent to 6,481.56. Germany's DAX fell 0.6 percent to 8,340.48 and France's CAC-40 fell 0.7 percent to 4,094.38.
Wall Street appeared headed for a flat opening, with Dow Jones industrial futures nearly unchanged at 15,036. S&P 500 futures were marginally lower at 1,650.70.
One of the day's few gainers was Japan's Nikkei 225 index, which closed 0.8 percent higher at 13,758.13. South Korea's Kospi fell 0.1 percent to 1,917.64. Hong Kong's Hang Seng declined 0.2 percent to 22,463.70. Australia's S&P/ASX 200 fell less than 0.1 percent to 5,112.50.
Trading was suspended in the Philippines due to severe flooding. Mainland Chinese shares rose. Taiwan and Indonesia fell.
Among individual stocks, Australian steel maker BlueScope Steel plunged 14 percent after reporting a net loss of $84 million Australian dollars for the 2012-13 financial year. Internet-related companies in Hong Kong posted gains. NetDragon rose 1.7 percent, while Tencent Holdings advanced 1 percent.
On Friday, the Dow Jones industrial average closed out its worst week of the year. The Dow was dragged lower by a weak performance from retailers and companies sensitive to higher interest rates. The Dow fell 0.2 percent to 15,081.47. The Standard & Poor's 500 dropped 0.3 percent to 1,655.83. The Nasdaq composite fell 0.1 percent to 3,602.78.
Benchmark oil for September delivery was down 44 cents to $107.02 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 13 cents to $107.46 on the Nymex on Friday.
In currencies, the euro rose to $1.3329 from $1.3319 late Friday. The dollar rose to 97.63 yen from 97.53 yen.
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