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GLOBAL MARKETS-Benchmark indexes up; doubt on end of Fed purchases returns
August 23, 2013 / 4:19 PM / in 4 years

GLOBAL MARKETS-Benchmark indexes up; doubt on end of Fed purchases returns

* U.S. stocks little changed after new home sales data
    * U.S. dollar index gives up gains
    * Treasuries prices rise on disppointing home sales

    NEW YORK, Aug 23 (Reuters) - Benchmark stock indexes edged
higher but the dollar fell on Friday after a U.S. government
report showed sales of new single-family homes in July fell to
their lowest level in nine months, raising doubts about the
timing and extent of cuts to the Federal Reserve's stimulus
program. . 
    Sales dropped 13.4 percent to an annual rate of 394,000
units, well below expectations, the Commerce Department said.
The housing recovery was a bright spot in the U.S. economic
    Europe's main stock markets were steady to higher but
attention remained firmly on Asia after a torrid week that has
wiped billions of dollars off emerging markets for the second
time in two months. 
    Yields on U.S. Treasuries traded lower but still near
two-year highs on Friday, with investors reluctant to break out
of recent ranges, given uncertainty around when the Fed might
slow its massive bond-buying program. The benchmark 10-year U.S.
Treasury note was up 16/32, its yield at 2.833
    "This has been a very unique market situation, with the Fed
stimulus being such an important component to the market rally.
This is uncharted waters for us," said Gordon Charlop, managing
director at Rosenblatt Securities in New York. "So regardless of
what the move is, the fact you are someplace you haven't been
before is cause for uncertainty."
    The next Fed monetary policy meeting is scheduled for Sept.
    The Dow Jones industrial average was up 6.49 points,
or 0.04 percent, at 14,970.23. The Standard & Poor's 500 Index
 was up 2.54 points, or 0.15 percent, at 1,659.50. The
Nasdaq Composite Index was up 10.94 points, or 0.30
percent, at 3,649.64. 
    Stanford University economist Robert Hall told the Kansas
City Federal Reserve Bank's annual conference in Jackson Hole,
Wyoming, that the biggest risk facing the U.S. economy is a
premature policy tightening by the Federal Reserve.
    MSCI's emerging share index was on track for its
first gains after six sessions in the red, while selling of
India's rupee subsided after the currency's worst week
against the dollar in decades.
    "Hopefully the worst (of the emerging market selling) may
now be over," said Hans Peterson, global head of asset
allocation at SEB investment management. He added that his firm
may soon start "bottom fishing" in Asia. 
    "It doesn't seem to be a repeat of the 1997 (Asian crisis)
situation... and it seems like people are not so keen on being
extremely short anymore, so it might twist around a bit."
    The dollar surrendered gains against a basket of currencies
 after earlier climbing to a three-week peak versus the
yen, helped by the rise in U.S. bond yields on expectations the
Fed will reduce its asset-buying program next month.    
    This week's market turbulence has been driven by growing
evidence that the Fed is ready to start turning off the taps on
its huge stimulus program, a conviction that is being bolstered
by strengthening global data.
    Germany confirmed on Friday that its economy grew at a
muscular 0.7 percent in the second quarter, while there was more
welcome news from Britain as it revised upward its earlier Q2
    Purchasing managers surveys this week have already showed
better-than-expected growth in the euro zone, a Chinese
manufacturing rebound and U.S. manufacturing activity rising to
a five-month high. 
    The week's early falls meant Europe's FTSEurofirst 300
, up 0.4 percent on Friday, was poised for its first
weekly drop since June, though the region has been a major
outperformer recently. 
    The rebound in Asia left MSCI's global share index
 up 0.6 percent, although it was not enough to
prevent it heading for its third weekly fall.
    U.S. Treasury yields tend to set the benchmark for borrowing
costs across the globe, so their recent rise - which is expected
to continue as the Fed winds down support - is making it more
difficult for indebted countries and firms to pay their bills.
    Data from Boston-based fund tracker EPFR Global on Thursday
showed $1.3 billion fled emerging debt funds in the week ending
Aug. 21, the biggest outflow since mid-July. 
    Other market experts also pointed to the fact that whereas
May and June's sharp sell-off in emerging markets calmed when
the change in direction of U.S. market rates made shorting
(betting against) those assets unprofitable, this time that did
not happen, meaning the selling could run for longer.
    Singapore Finance Minister Tharman Shanmugaratnam said it
would not be in anyone's interest for very low global interest
rates to continue indefinitely, as this leads to financial
imbalances. "The tapering of QE and tightening of U.S. monetary
policy, when it eventually occurs, will not be a bad thing for
the region's economies," Tharman told a banking conference.
    In commodities trading, copper prices were up 0.4
percent, continuing to rise in the wake of Thursday's Chinese
manufacturing data that suggested demand from the world's
second-biggest economy and top metals consumer could pick up. 
    Brent and U.S. crude found early support from positive U.S.
economic data and disruptions to Libyan exports. Brent crude
 traded up $1.08 to $110.98 a barrel, and U.S. crude
 rose $1.16 to $106.19 a barrel.

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