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 Europe's main markets had inched higher in early trade, with
investors avoiding firmer bets ahead of the first meeting of the
U.S. Federal Reserve in years at which a possible rise in interest
rates has been a live issue.
But worries about the impact of any Fed hike on dollar borrowers
across the developing world, and its effect on growth, continued to
dominate, with Shanghai stocks falling another 3.5 percent and
oil at just $46 a barrel.
"It's all about caution today," said Andy Sullivan, a portfolio
manager with Swiss investment firm GL Financial Group. "There is
concern about the Fed, plus the China data continuing to be weak."
While Tokyo inched higher, MSCI's broadest index of Asia-Pacific
shares outside Japan erased early gains to fall 0.7 percent.
An hour after opening, the main indices in Frankfurt, London and
Paris were up to 1 percent lower.
If concerns around emerging economies have dominated the past month,
there are still reasons to be more bullish on a number of developed
markets.
Sullivan said he was positive on European equities, which will draw
support from the European Central Bank's campaign of quantitative
easing over the next year and look undervalued compared to their
U.S. peers.
In Britain, inflation data gave another signal of an economy inching
back to health, supporting expectations the Bank of England will
follow the Federal Reserve in raising interest rates next year.
Sterling rose around a quarter of a percent.
The Australian dollar, often a proxy for China on major currency
markets, was a touch lower, while iron ore and copper prices -- also
often guided by Chinese demand -- fell by 0.5-1.0 percent.
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A Barclays survey showed growth in China and other emerging markets
was now the top concern for almost half of investors worldwide over
the next year. Less than 10 percent saw Chinese assets as cheap,
suggesting the sell-off has further to go.
"Investors believe overcapacity is China’s main economic problem and
most see meaningful structural reforms as necessary before they
could feel more confident about prospects," Barclays analysts said
in a report.
The yen <JPY=>, traditionally investors' safe haven of choice in
times of turbulence, rose 0.6 percent, building on gains after the
Bank of Japan held policy steady at the end of its two-day meeting.
The euro gave up about 0.7 percent to 135.05 yen, while it was
marginally lower against the dollar at $1.1304.
(Editing by Catherine Evans)
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