World shares fall after Fed; euro down on ECB report

Minutes from Fed meet indicated that US central bank could start tapering in next few months

US stocks and gold retreated on Wednesday while US Treasury yields shot higher after minutes from a Federal Reserve policy meeting in October suggested the US central bank could begin to scale back its bond buying in the next few months.

Wall Street stocks, which had been higher, turned negative following the release of the minutes, while spot gold prices extended their early declines, falling 2.3%.

Fed officials felt they could decide to start scaling back the central bank's massive $85-billion-a-month asset-purchase program at one of the bank's next meetings, provided this was warranted by economic growth, the minutes showed. Policymakers are next scheduled to gather on December 17-18.

"We take these minutes as meaning March is the most likely scenario for tapering. There's no overwhelming case to be made for them to act in December," said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.

Woolfolk said he was surprised by the relatively little attention given to the impact of the 16-day government shutdown in October.

"Maybe it really was a non-event, judging by today's retail sales data and the October nonfarm payrolls," he said.

Comments from a senior Fed official that a solid US jobs report for November would increase the likelihood of a reduction in bond purchases beginning as early as December gave a further boost to bond yields.

The Dow Jones industrial average ended down 66.21 points, or 0.41%, at 15,900.82. The Standard & Poor's 500 Index was down 6.50 points, or 0.36%, at 1,781.37. The Nasdaq Composite Index was down 10.28 points, or 0.26%, at 3,921.27.

The euro fell sharply on a report saying the European Central Bank was considering a negative deposit rate.

Bloomberg reported that if the ECB were to take the deposit rate for cash it holds overnight for banks into negative territory, it would consider -0.1%. The current rate is zero. An ECB spokesperson declined to comment.

The euro fell to a low of $1.3430, and last traded down 0.78% at $1.3433. The US dollar index rose 0.4% to 81.037.

The Fed's stimulus and similar programs from other major central banks have fueled equity gains in 2013, taking Wall Street to repeated all-time highs and other regions around the world to multi-year highs.

The FTSEurofirst 300, which closed before the release of the Fed minutes, ended up 0.12%. The MSCI world share index fell 0.4%.

While the Fed's accommodative monetary policy is expected to provide a floor under equities for as long as it continues, questions about its pullback have tempered buying enthusiasm. In addition, the size of the rally has market participants seeking new catalysts in an environment marked by signs of tepid economic growth.

US equities were boosted early in the session by data showing consumer spending rose more than expected in October, while consumer prices unexpectedly fell.

Among other asset classes, Brent crude oil futures rose 0.9% to $107.85 per barrel. US crude fell 1 cent to settle at $93.33.

The benchmark 10-year US Treasury note fell 22/32 in price to yield 2.7896%.