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World stocks tentative amid Fed stimulus cut fears

BEIJING/HONG KONG--World stock markets were tentative Friday as investors prepared for the U.S. Federal Reserve's decision next week on whether to reduce its monetary stimulus.

Global equities have seen a broad sell-off over the past four days after positive economic numbers — including falling unemployment and strong economic growth figures — have strengthened the argument for a December cut to the Fed's US$85 billion a month asset-purchasing.

Those expectations were reinforced on Thursday after the government said retail sales grew 0.7 percent in November, above the forecast 0.6 percent and pointing to building confidence among US shoppers, a key driver of economic growth.

Strong U.S. retail sales and signs of an imminent budget agreement in Congress have reinforced expectations that the Federal Open Market Committee meeting on Dec. 17-18 might decide to start reducing its US$85 billion worth of monthly financial asset purchases.

With attention now fully on the U.S. central bank's policy meeting, each release pointing to a strengthening economy is being pounced on as another step towards a wind-down of the bond-buying scheme.

The U.S. stimulus has buoyed stocks over the past few years, and its potential reduction has jolted markets in recent months. However, any tapering is expected to be accompanied by a renewed commitment by the Fed to keep interest rates low. That, analysts say, helps explain why stock markets are still trading at relative highs and why bond markets aren't too volatile.

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