LONDON (AP) — Stock markets edged lower on Wednesday as investors worried about the future of monetary stimulus by two major central banks, the Federal Reserve and the Bank of Japan.
On Tuesday, stocks were hit while the yen surged, particularly against the dollar, after Japan's central bank kept policy unchanged. Japan has been one of the main influences in the markets as investors have scrutinized the authorities' attempts to get the country out of its two-decade stagnation.
In April, the Bank of Japan announced a massive stimulus in an attempt to get inflation up to 2 percent. The euphoria that drove the Nikkei up to five-year highs has since dissipated and the index is now around 20 percent down from its recent peak.
The other major driver in markets has been the uncertainty over the future course of U.S. monetary policy following a solid, if unspectacular, improvement in economic data.
The markets now expect some reduction in the Federal Reserve's monthly asset purchases sometime this year. The stimulus has been one of the main reasons why many assets, such as global stock markets and emerging markets, have bounced back over the past few years.
In Europe, Britain's FTSE 100 index fell 0.6 percent to close at 6,299.45 while Germany's DAX fell 1 percent to 8,143.27. The CAC-40 in France ended 0.4 percent lower at 3,793.70.
On Wall Street, the Dow Jones industrial average was down 0.5 percent at 15,047 while the broader S&P 500 index fell 0.6 percent to 1,617.10.
Earlier in Asia, stocks faltered though the scale of the retreat, particularly in Tokyo, was relatively modest. The Nikkei 225, the regional heavyweight, shed 0.2 percent to 13,289.32 — the steady calm masks another wild ride for the index during the session.
The yen, which surged around 3 percent against the dollar on Tuesday, continued to strengthen — the dollar was down 0.6 percent at 95.42 yen.
"The fact that investors were disappointed (on Tuesday) by the lack of fresh BoJ measures does highlight how addicted the market has become to the promise of a continual flow of cheap money," said Jane Foley, senior currency strategist at Rabobank International.
South Korea's Kospi shed 0.6 percent to 1,909.91 while Sydney's ASX S&P 200 fell 0.7 percent to 4,724.50. Singapore's FTSE Straits Times index lost 0.5 percent to 3,154.53 while India's Sensex lost 0.3 percent to 19,077.56. New Zealand also fell.
Markets in China, Hong Kong and Taiwan were closed for a holiday.
Elsewhere, the euro was up 0.3 percent at $1.3351 while the benchmark New York contract for crude oil was up 50 cents at $95.88 per barrel.