European shares drop as early Fed taper view hardens

LONDON Thu Dec 12, 2013 3:18am EST

LONDON Dec 12 (Reuters) - European stocks fell on Thursday, with the probable nomination of a relatively hawkish central banker to the U.S. Federal Reserve adding to the view that it may slow its monetary stimulus sooner than previously thought.

By 0804 GMT, the pan-European FTSEurofirst 300 was down 0.3 percent at 1,252.29.

Fortum provided support to the index, up 6.5 percent after the state-controlled Finnish utility said it has agreed to sell its power grid in Finland to Suomi Power Networks consortium for 2.55 billion euros ($3.52 billion).

Ex-Bank of Israel governor Stanley Fischer has been asked to be the Federal Reserve's next vice chair, a source familiar with the issue said on Wednesday, and is seen as less dovish than the nominee to lead the U.S. central bank, Janet Yellen.

The news came late on a day which saw U.S. stocks post their largest drop in a month after a provisional budget deal in Washington removed one near-term reason for the Fed to maintain its current pace of economic stimulus. Asian shares also suffered on these "tapering" concerns.

U.S. retail sales and initial jobless claims data will be in focus on Thursday, with traders saying a set of strong numbers could harden the view that the Fed could begin a taper of its asset purchases - known as quantitative easing (QE) - as early as its policy meeting next week.

"The jury is still out as to whether the announcement to start the tapering of QE will be made then, but arguably it's the uncertainty that's eating into markets right now," Patrick Latchford at Monex Capital Markets said.

"There are also suggestions that agreement on Capitol Hill over the Federal Budget ... is adding weight to the argument for swift action."

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