Europe weighed down by tapering fears

European stocks are offside this lunchtime, as traders’ concerns about the Federal Reserve trimming its stimulus package have been reignited.

Yesterday the US ISM manufacturing report accelerated at its fastest pace in two years, which suggests that the US will be well-positioned at the start of 2014. Although this is positive news for the US economy, traders are viewing it as bad news for global equities. The next Federal Reserve meeting is in just over two weeks, and since recent economic data from the US has been strong it is possible tapering of the bond-buying scheme will be on the cards.

Meanwhile, Olli Rehn of the European Commission warned the Italian government that it has not done enough to reduce the country’s national debt. The Rome administration has a debt-to-gross-domestic-product ratio of 134%. This is the second-highest in the eurozone, with Greece having the largest figure. High levels of public debt are unsustainable in the long run, and if Italy does not stick to its debt-reduction programme it could face a downgrade of its credit ratings. This could push equities lower.

Italy 40 chart

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.