* Shares hurt by lack of clarity around Fed tapering
* China PMI rises to six-month high
* Merkel sees victory but coalition still needed
* Draghi comments pressure the euro
NEW YORK, Sept 23 Global equities slid on Monday
as nagging uncertainty over the Federal Reserve's policy stance
offset an election triumph for German leader Angela Merkel and
upbeat euro zone and Chinese data.
The euro took a tumble after European Central Bank President
Mario Draghi said euro zone interest rates will remain at
current or lower levels for an extended period of time.
"A combination of hearing lots of Fed presidents, and people
from Capitol Hill talking will always put investors in a bad
mood," said Ron Florance, deputy chief investment officer at
Wells Fargo Private Bank in Scottsdale, Arizona. "None of them
are providing clarity. They are just providing more uncertainty
William Dudley, president of the Federal Reserve Bank of New
York, said on Monday that the timeline that Fed Chairman Ben
Bernanke articulated in June for scaling back the central bank's
stimulus measures is "still very much intact."
The Fed surprised financial markets last week by deciding to
stick with its program of buying Treasuries and mortgage-backed
securities at a monthly pace of $85 billion, as it cited
continued risks to the economy.
Two other regional Fed presidents gave speeches on Monday.
Richard Fisher, president of the Dallas Fed and a non-voter on
policy this year, said last week's unexpected decision on
bond-buying hurt the central bank's credibility.
And Dennis Lockhart, president of the Atlanta Fed, warned
that America risked "losing its economic mojo" unless lawmakers
worked to reverse decline sin labor productivity and new job
The Dow Jones industrial average was down 45.57
points, or 0.29 percent, at 15,405.52. The Standard & Poor's 500
Index was down 8.75 points, or 0.51 percent, at
1,701.16. The Nasdaq Composite Index was down 14.08
points, or 0.37 percent, at 3,760.65.
The pan-European FTSEurofirst 300 were down 0.5
percent at 1,256.11. MSCI's index of world shares
was down 0.3 percent.
World and European stocks hit a five-year high last week
while the S&P 500 and Dow industrials hit record highs after the
Fed kept policy unchanged.
Despite the strong showing by Merkel's conservatives in
Germany's general election on Sunday, the party appeared just
short of the votes needed to rule on their own, while current
coalition partner the Free Democrats suffered a humiliating exit
Stock markets also struggled after Friday's comments by a
top Fed policymaker who hinted the U.S. central bank may not
wait too much longer to phase out its huge stimulus program.
Adding to concerns was the approaching Oct 1 deadline for
Congress to avoid a government shutdown as lawmakers negotiate
ahead of the end of the fiscal year on Sept. 30.
The New York Fed's Dudley warned that fiscal uncertainties
"loom very large" as Congress prepares to hash out a deal to
avoid a government shutdown and raise the nation's debt ceiling.
The negative sentiment largely offset strong data from
Europe. Markit's September euro zone Flash Composite Purchasing
Managers' Index jumped to its highest level since June 2011 and
beat expectations as new orders hit their fastest pace in over
"We had some good news out of China and Europe and the
elections in Germany are favorable for the euro zone, but focus
remains on the Fed," said Peter Cardillo, chief market economist
at Rockwell Global Capital in New York.
The euro was down 0.1 percent at $1.3503 after
Draghi's comments offset Merkel's win.
But Nick Beecroft, chairman and senior market analyst for
Saxo Bank capital markets, said Merkel's election win was "a
ringing endorsement" for efforts to preserve the euro.
"The positive thing for the euro is that it is 99 percent
certain we will have a grand coalition that will be able to
change the (German) constitution if needed to allow euro bonds.
"This won't happen overnight but I expect it to gradually
come onto the agenda," he added.
Commodity currencies were bid after a survey showed a
promising pickup in Chinese export orders, another sign of
stabilization in China, the world's second biggest economy.
The preliminary HSBC Purchasing Managers' Index for China
climbed to 51.2 in September, from August's 50.1, with 10 out of
11 sub-indexes up in the month. Dealers had looked for a reading
of around 50.9.
The Australian dollar rose 0.5 percent to $0.9444.
China alone takes around one-third of all Australia's exports,
chiefly commodities such as iron ore, the key raw material for
Shares in Shanghai gained 1.0 percent and Taiwan's
main index was up 0.9 percent on the same data.
U.S. Treasuries prices rose on Monday.
The benchmark 10-year U.S. Treasury note was up
6/32, with the yield at 2.7136 percent.
Europe's bond markets were little changed after the German
election, with German Bunds and most euro zone
periphery debt faltering after a positive start..
In other markets, Brent crude oil was down 1.2
percent at $107.92 a barrel, while U.S. crude was down
1.3 percent at $103.35.
Gold rose 0.1 percent to $1,326 an ounce.