Asia stocks down as Fed fears weigh on markets
BANGKOK (AP) - Concerns that the Federal Reserve might start scaling back its stimulus program due to improvement in the US economy sent Asian stock markets lower on Thursday.
Sharp rises in global stock markets this year have been partly fueled by central bank actions to keep interest rates super low to support economic recovery in the US, Europe and Japan. Positive signs of growth in the US, including data released Tuesday showing improved consumer confidence and housing prices, have also helped to boost Wall Street stocks to record highs.
However, an improving US economy increases the chance that the Fed might ease back on its massive bond-buying program, known as quantitative easing. The purchase of US$85 billion (S$108 billion) a month in Treasury bonds has helped keep interest rates down and been a boon to stock markets, where investors have fled in search of higher returns.
Investment energy was also curbed by warnings from the Paris-based Organization for Economic Cooperation and Development, which said Wednesday that Europe's recession risked hurting the world economy. The OECD slashed its forecast for the combined economy of the 17 countries that use the euro, saying it will shrink by 0.6 percent this year, after a 0.5 percent drop in 2012.