European Markets Drop Ahead of Cues from US Federal Reserve

European markets opened lower on 18 November, and continued trading to the downside thereafter, amid renewed US stimulus taper fears, as investors await cues from the Federal Reserve and the US labour department through the week.

The Stoxx Europe 600 index opened 0.1% lower to 322.69.

Britain's FTSE 100 opened 0.1% lower.

Germany's DAX 30 and France's CAC 40 index opened 0.2% lower.

Spain's IBEX 35 was trading 0.36% lower after opening lower.

Italy's FTSE MIB was trading 0.18% lower after opening lower

Market participants will be following outgoing Fed chief Ben Bernanke's speech on 19 November for clues as to the future pace of the central bank's $85bn-a-month bond buying stimulus.

They also await the release of the minutes of the Federal Open Market Committee's (FOMC) October meeting, due out on 20 October.

Together, they could help investors determine whether Fed policymakers would push for a reduction in the central bank's asset buys December onwards.

In addition, market players will also be tracking US labour market data due out on 21 October as it could impact the Fed's monetary policy decision due out on 18 December.

Meanwhile, European investors will also be watching developments in Italy, where former prime minister Silvio Berlusconi's People of Freedom (PdL) party will hold its national convention this weekend.

PdL is a part of the Enrico Letta coalition and developments at the weekend meeting could impact the ruling coalition. The meeting comes ahead of the 27 November Senate vote that will decide on whether to expel Berlusconi from parliament.

In company news, Britain's Lloyds Banking Group said it has sold its fund management arm Scottish Widows Investment Partnership to Aberdeen Asset Management for £660m as it looks to shore up cash ahead of its planned privatisation.

In Asia

The Japanese Nikkei finished 0.01% lower on 18 November while Australia's ASX finished 0.31% lower.

All other indices traded in green territory as investors cheered China's broad-based reforms package.

On 15 November, Beijing unleashed a flurry of detailed economic and social reform plans in a bid to secure the country's future growth.

Beijing said it plans to cut red tape by scrapping residency restrictions in small cities and townships, while also integrating urban and rural social security systems. This includes the establishment of an exchange market for rural property rights transfers.

China also pledged to accelerate capital account convertibility and push ahead with an environmental tax.

Among other economic reforms, China plans to set up a debt risk alert mechanism as well as standardising the way local and central government debt is managed. Property tax and resource tax are also tipped to be accelerated.

Deutsche Bank said in a note to clients: "The reform package will have a long-lasting positive impact on China's equity market outlook".

The German bank also forecast that the MSCI China index would jump some 20-25% over the next 12 months.

Evan Lucas, market strategist at IG, said in a note to clients: "The plenum talks in decades, not overnight. Consumption demand will remain; Australian resources will remain a consumption target of Chinese users along with Australian services and agricultural goods. The hard landing some are predicting will most likely be a bump".

Asian stock markets outside Australia and India finished higher during the week ended 16 November. The Japanese Nikkei led the pack while India's Sensex trailed.

Wall Street Up

On Wall Street, indices ended higher on 15 November on expectations that the Fed would continue buying bonds beyond December, 2013. The Dow and the S&P 500 finished at record highs.

The Dow finished 85.48 points higher at 15,961.70.

The S&P 500 closed 56 points higher at 1,798.18.

The Nasdaq ended 13.23 points higher at 3,985.97.

Tim Radford, global analyst at Rivkin Securities said in a note to clients "Helping drive US stocks higher Friday was strong gains from oil giant Exxon Mobile on news Warren Buffet has taken a large stake in the company".

For the week ended 16 November, the Dow finished 1.3% higher, the S&P 500 closed 1.6% higher and the Nasdaq ended 1.7% higher.