GLOBAL MARKETS-Doubts on Fed lift dollar, hurt stocks

* Dollar up on doubts over the size of U.S. Fed’s QE

* WSJ says Fed may buy few hundred bln dollars of Treasuries

* World stocks and commodities fall

By Dominic Lau

LONDON, Oct 27 (BestGrowthStock) – Doubts over how aggressively the
U.S. Federal Reserve is going to stimulate a flagging recovery
with another round of money-printing weighed on world equities
and commodities on Wednesday while boosting the dollar.
Investors have been pricing in large scale U.S. Treasury
bond purchases by the Fed, lifting equities, commodities and
emerging market assets in recent weeks while the dollar has come
under pressure against other currencies.

However, the Wall Street Journal said on Wednesday that the
Fed is likely to unveil next week an asset purchase programme
worth a few hundred billion dollars over several months, and
that officials wanted to avoid a “shock and awe” style approach.
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“Underlying sentiment has clearly deteriorated … the
market is moving away from the expectation of a huge initial
increase in QE to this rather incremental approach,” said Nick
Stamenkovic, rate strategist at RIA Capital Markets in
Edinburgh.
A recent Reuters survey showed U.S. primary dealers expected
the size of the quantitative easing to be between $500 billion
and $1.5 trillion.

The dollar was up 0.3 percent at 81.61 yen (JPY=: ), pulling
further away from a 15-year low of 80.41 yen struck on trading
platform EBS earlier this week, and put on 0.1 percent against a
basket of currencies. (.DXY: )

The euro (EUR=: ) eased 0.2 percent to $1.3830.

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WORLD STOCKS, COMMODITIES PRESSURED

The uncertainty over the size of quantitative easing
dampened equities and commodity prices.

World stocks measured by MSCI All-Country World Index
(.MIWD000000PUS: ) fell 0.4 percent and MSCI emerging market
benchmark (.MSCIEF: ) lost 1.1 percent, while the Thomson Reuters
global equity index (.TRXFLDGLPU: ) eased 0.2 percent.

U.S. stock index futures (SPc1: ) (DJc1: ) (NDc1: ) lost 0.2 to
0.3 percent, indicating a weaker start for Wall Street.

Europe’s FTSEurofirst 300 (.FTEU3: ) was flat, though the
VDAX-NEW volatility index (.V1XI: ) rose 2 percent after hitting a
near three-week high, indicating investors’ lower risk appetite.
Tokyo’s Nikkei average (.N225: ) added 0.1 percent, helped by a
softer yen.

Nick Tranter, head of derivatives at Execution Noble in
London, said people had become more cautious in recent days
after a strong run in the market, and he expected investors to
purchase more November and December put options this week to
hedge against a pull back in equities.

“The market is running very long risk, and isn’t carrying
the kind of natural hedge that it carries normally, so people
will be looking to put on near-term protection strategies,” he
said, adding that sentiment remained “constructive”.

Nevertheless, stock valuations remain cheap. The MSCI
All-Country World Index carries a 12-month forward earnings
ratio of 12.1 times, versus a 10-year average of 15.1, Thomson
Reuters Datastream showed.

Gold (XAU=: ) fell 0.5 percent and copper (MCU3: ) dipped 0.1
percent, while oil prices (CLc1: ) dropped 1 percent to trade
below $82 a barrel.

Yields on benchmark 10-year U.S. Treasuries (US10YT=RR: ) rose
5 basis points to 2.6941 percent, while those on 10-year German
Bunds (DE10YT=RR: ) were up 0.7 basis points at 2.579 percent.
(Additional reporting by William James; Editing by Ruth
Pitchford)

GLOBAL MARKETS-Doubts on Fed lift dollar, hurt stocks