World markets slide anew on emerging markets

AMSTERDAM — World markets fell Wednesday as jitters over the prospects for emerging economies resurfaced and investors expected the U.S. Federal Reserve to announce another cut to its stimulus program.

Turkey's central bank hiked its lending rates overnight by more than expected to stabilize the Turkish lira and keep inflation under control. That gave an initial boost to its currency and to world markets.

But the effect gradually faded, and a surprise move by South Africa's central bank to raise rates in the early afternoon only strengthened its currency for a half-hour.

The shook confidence in markets more broadly, pushing stocks lower.

"The biggest reason for this volatility is that we've seen the impact of a major intervention by Turkey fade so quickly," said IG market analyst Alastair McCaig. "Now South Africa has done the same thing and it only boosted the rand for about a half hour."

In the background, investors are anticipating a decision later in the day by the U.S. Federal Reserve to further "taper," or reduce, its mortgage and long-term bond purchases later Wednesday.

Although the Fed insists tapering is not equivalent to monetary tightening, if markets interpret it as even a prelude to tightening, it has the potential to again weaken emerging currencies as investors prefer to hold dollars.

"It's not so much that people think there will be instant ramifications if the taper proceeds as expected, it's just part of a more general worry about what it may mean for global stability," McCaig said.

In Europe, Germany's DAX fell 0.8 percent to close at 9,336.73. Britain's FTSE fell 0.4 percent to 6,544.28, while France's CAC 40 lose 0.7 percent to 4,156.98.

On Wall Street, the Dow fell 0.6 percent to 15,837.88 while S&P 500 shed 0.4 percent to 1,785.20.

Stocks began a sell-off last week, initially on fears about the Chinese economy. The slide continued as currencies in emerging economies including Argentina and Turkey slumped.

After Turkey's action Wednesday night, Asian stocks gained strongly, before sentiment soured during European trading hours.

Japan's Nikkei 225 jumped 2.1 percent to 15,294.54 and Hong Kong's Hang Seng rose 1.1 percent to 22,191.20. China's Shanghai Composite gained 0.3 percent. South Korean and Indonesian also climbed.

In other markets, benchmark oil for March delivery was down 32 cents to $97.09 per barrel in electronic trading on the New York Mercantile Exchange.

In currencies, which were highly volatile, the euro fell 0.1 percent to $1.3661. The dollar erased early gains and fell sharply against the yen, down 0.7 percent to 102.19 yen.

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AP reporter Teresa Cerojano contributed to this story from Manila, Philippines

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