GLOBAL MARKETS-Shares rise as Fed fear ebbs; gold's glimmer dims

Fri Jun 28, 2013 1:22pm EDT

* World equity markets rise as unease over stimulus
withdrawal fades
    * Gold to close worst quarter on records going back to 1968
    * Dollar/yen at three-week high, edges close to 100 yen
    * Trade seen dominated by end-of-quarter adjustments


    By Rodrigo Campos
    NEW YORK, June 28 (Reuters) - World equity markets rose for
a fourth day on Friday but the quarter was set to finish in the
red for stocks and other assets as fears of an early withdrawal
of U.S. monetary stimulus made volatility spike and weighed on
markets.
    Weakness in technology shares kept U.S. stocks flat, while
better economic data from Japan and efforts by China's central
bank to ease credit concerns gave other equity markets support.
MSCI's world equity index rose 0.3 percent.
    The Dow Jones industrial average fell 67.2 points or
0.45 percent, to 14,957.29, the S&P 500 lost 2.85 points
or 0.18 percent, to 1,610.35 and the Nasdaq Composite 
added 2.2 points or 0.06 percent, to 3,404.06.
    Market moves were likely to be volatile in the final trading
day of the second quarter as investors pondered the likely
impact of an end to the era of cheap money which had driven
returns in the first half of 2013.
    "The market is continuing to adjust as we try to figure out
what's going on with respect to Fed policy, and we should
continue to see volatility as things get sorted out," said Rex
Macey, who helps oversee $20 billion in assets as chief
investment officer at Wilmington Trust in Atlanta, Georgia,
adding "We're cooling off a little bit after a few days of
strong action."
 
    Global stock, bond and commodity markets have been highly
volatile since Federal Reserve Chairman Ben Bernanke signalled
last week that the U.S. central bank would soon cut the pace of
its stimulative bond buying unless the economic recovery slows.
    Two Fed policymakers spoke on Thursday to reassure investors
that any winding down of the Fed's $85 billion a month asset
purchases was still some way off, though its ultimate course was
set.
    Fed Governor Jeremy Stein said Friday a longer view is
needed for the Fed's policy-setting committee to make a good
judgment and to avoid undue market volatility, bolstering the
case for withdrawing some stimulus by summer's end.
    Talk of the Fed 'tapering' its bond buying hit Treasury
prices hard. The slump in prices started in May, gaining
momentum when Bernanke suggested it could be looking to wind
down its bond-buying program, now in its third phase of
'quantitative easing,' dubbed QE3.
    But the exit became a stampede last week when Bernanke said
more strongly that the Fed could begin slowing QE3 this year as
the economy gains steam.
    With month- and quarter-end also adding to volatility,
exposure to U.S. Treasuries through the iShares Barclays
20-year-plus exchange-traded fund was set to take its
hardest quarterly hit since the start of 2012.
    The recent choppiness could linger in markets in the next
few days, said Justin Lederer, strategist at Cantor Fitzgerald
in New York, especially going into next Friday's monthly U.S.
payrolls report.
    "That could definitely set the tone for a date for QE" to
start winding down, he added.
    The benchmark U.S. 10-year Treasury note fell
12/32 in price to yield 2.521 percent, compared with 2.476
percent late on Thursday.
    A Reuters survey of 53 investors across the United States,
Europe and Japan released on Friday found that funds had already
cut their average equity holdings in June to a nine-month low
due to the recent volatility and had held more cash.
    Gold, which had soared in value as a hedge against higher
inflation from all the cheap central bank money being printed,
has slumped. Spot gold prices are on track to post their largest
monthly loss since October 2008, with prices at levels not seen
since August 2010. For the quarter, gold lost about 24 percent,
the largest such decline on records going back to 1968.

    WINDOW DRESSING
    The end-of-quarter manoeuvring was cited for volatility in
the euro on Friday. The euro zone common currency was off 0.3
percent to $1.2997 after falling to $1.2954.
    The broad FTSEurofirst 300 index closed down 0.45
percent to end June 5.3 percent lower after a record 12 monthly
rises.
    Earlier, MSCI's broadest index of Asia-Pacific shares
outside Japan climbed 1.4 percent, pulling
further away from an 11-month low and wiping out this week's
losses. It was still down around 7 percent for the year. 
    China's stock markets had also seen their biggest gains in
two months after the country's central bank, which had let
short-term borrowing costs spike to record highs, said it would
ensure its policy supported a slowing economy. 
 
    Brent crude oil futures were slightly higher on the
day, on track for their first monthly rise in five months.
Copper edged up but faced its biggest quarterly loss in
almost two years.
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