GLOBAL MARKETS-Shares, bonds slip as Fed speculation dominates

Tue Nov 12, 2013 11:57am EST

* Wall Street edges lower with Fed speakers in focus

* Brent rises on Libya, Iran uncertainty; U.S. crude falls

* Dollar climbs to one-month peak vs yen, nears 100 yen

By Herbert Lash

NEW YORK, Nov 12 (Reuters) - Global equity markets and government debt prices fell on Tuesday as investors speculated on how soon the Federal Reserve may begin reducing its stimulus, a key support to the economy and stocks.

German Bunds hit three-week lows, tracking weaker prices for U.S. Treasuries, as investors made room for this week's latest supply of U.S. government debt.

A measure of global equity performance was down slightly as stocks on Wall Street and in Europe fell, a day after the Dow Jones industrial average hit yet another record close.

With little economic data, investors will search for clues about potential Fed tapering in remarks by Minneapolis Fed President Narayana Kocherlakota and Atlanta Fed President Dennis Lockhart, who are due to speak in the afternoon.

Dallas Fed President Richard Fisher said in an interview with CNBC cable television that the Fed's monetary stimulus program cannot continue forever.

"There are not as many stocks participating on the upside as there are for the downside," said Frank Gretz, market analyst and technician for brokerage Shields & Co. in New York.

"The net of this is that the market has more to go on the downside on the short-term, although there isn't a big problem, a big divergence in the market," he said.

MSCI's all-country world equity index fell 0.2 percent after two days of gains, while the pan-European FTSEurofirst 300 index of leading regional shares fell 0.57 percent.

The Dow Jones industrial average fell 53.81 points or 0.34 percent, to 15,729.29, the S&P 500 lost 5.45 points or 0.31 percent, to 1,766.44 and the Nasdaq Composite dropped 9.914 points or 0.25 percent, to 3,909.875.

U.S. Treasury prices fell, with the benchmark 10-year U.S. Treasury note down 8/32 in price to yield 2.7738 percent.

The fallout of forecast-beating U.S. jobs data on Friday wiped away Bund gains triggered by the European Central Bank's surprise interest rate cut a day earlier.

"The main story for the Bunds is still the Fed and what happens with tapering," said Alan McQuaid, chief economist at Merrion Stockbrokers in Dublin.

"I still think more people expect them to move in March rather than in December. That's my view as well, but I wouldn't completely rule out December."

The Bund future settled down 31 ticks at 140.70.

The dollar rose to a one-month peak against the yen as investors began to bet the Fed will begin trimming stimulus sooner than previously anticipated.

The dollar was last up 0.47 percent at 99.62 yen, with the peak of 99.79 yen its strongest since Sept. 13.

The euro was up 0.18 percent at $1.3430 and holding above a two-month low of $1.3295 hit last Thursday, when it sold off sharply after the ECB's unexpected rate cut.

Brent crude futures initially rose as disruptions to Libyan oil exports showed no sign of abating and Iran said splits between Western powers had prevented a breakthrough in nuclear talks that could relax sanctions.

Brent crude for December delivery was up 5 cents at $106.45 a barrel. U.S. crude for December delivery was down 83 cents at $94.31 a barrel.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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