The FTSE has opened down this morning, following other global markets. Federal Reserve predictions about the health of the US economy improved, prompting fears that QE tapering - a reduction in the rate at which the Fed's balance sheet is expanded - may begin sooner than expected.
Comments from Fed chairman Ben Bernanke confirmed that the central bank could begin tapering later this year if its predictions about the economy were accurate.
The market hates the idea that the Fed is more optimistic about the US economy - go figure. What strange times we live in— Michael Hewson (@michaelhewson) June 20, 2013
In the US the Dow Jones Industrial Average fell by 206.04 points to end at 15,112.18, while the S&P 500 lost 1.4 per cent to close at 1,628.93. Asian markets followed, with Japan's Nikkei 225 closing down 230.64 points at 13,014.58.
Deutsche Bank's Jim Reid:
So where do we go from here? Well, the Fed have just made the market even more sensitive to data than it was previously and the volatility surrounding each key data print will likely multiply. We now think this will be a difficult few weeks for risk, especially if the data is on the stronger side. If you wanted to be more sanguine you would highlight the fact that they remain data dependent and no stimulus reduction has been announced yet. The removal still requires another few weeks of improving data. It might now need data to disappoint over the summer for risk to perform.