Unease over Fed rate path dents European stocks

LONDON: Uncertainty over the future path U.S. interest rates weighed on European stocks on Thursday, while the resignation of Japan's economy minister impacted currency markets, sending the yen higher.

Japanese Economy Minister Akira Amari said he would step down from his post to deal with allegations, which he denies, that he received bribes from a construction company.

Amari's resignation, which came after Tokyo's Nikkei stock market had closed, caused the yen to rise slightly against the dollar, with Japanese policymakers currently grappling with the effects of a firmer yen and worries about a weakening global economy.

The FTSEurofirst 300 index of top European shares fell 0.2 percent, partly due to concerns about whether the U.S. Federal Reserve can continue to raise interest rates at a time of market instability.

The Fed kept interest rates unchanged on Wednesday and said it was "closely monitoring" global economic and financial developments, signalling it had accounted for a stock market sell-off but was not ready to abandon a plan to tighten monetary policy this year.

"There is a risk that there may be a U.S. recession, but I think those fears are overdone. Nevertheless, it's possible we will reduce our equity allocation in the short term given that the volatility in financial markets is likely to remain," said Francois Savary, chief investment officer at Geneva-based Prime Partners.

The MSCI All-Country World index was up 0.1 percent, while the MSCI Emerging Market index advanced 0.7 percent.

Euro zone bond yields fell on Thursday, while oil prices were choppy.

Concerns about a slowdown in China, the world's second-biggest economy and a major consumer of oil and metals, have hit world stock markets this year and weighed on oil and metals prices.

China's volatile shares tumbled again on Thursday, and some traders said oil prices would remain under pressure.

"We remain slightly sceptical of further increases with the current weak fundamentals," said Daniel Ang at Phillip Futures, commenting on the oil price.