LONDON — The rally in global stock markets fizzled out on Friday, two days after the U.S. Federal Reserve buoyed sentiment by keeping its monetary stimulus program in place.
The Fed this week unexpectedly decided to keep its asset purchase program on hold. The program was instituted during the 2008 financial crisis to increase the flow of money available for loans to push down interest rates and spur growth.
The lower interest rates have proved a boon for stock markets, so the move buoyed sentiment.
But investors are wondering whether the Fed's move was just a small delay. St. Louis Fed president James Bullard told Bloomberg that it's possible the Fed will reduce its bond-buying at its next meeting in October, depending on what economic data show. That nudged markets lower.
Britain's FTSE 100 fell 0.4 percent to close at 6,596.43 while Germany's DAX edged down 0.2 percent to 8,675.73. France's CAC-40 ended almost 0.1 percent lower at 4,203.66.
On Wall Street, with Dow Jones industrial average was down 0.3 percent at 15,583.32 while the S&P 500 was down the same rate to 1,717.35.
Trading throughout Asia was muted, largely due to public holidays. Markets in Hong Kong, mainland China, Taiwan, South Korea and Malaysia were closed.
In Japan, the Nikkei 225 index gave up early gains to close 0.2 percent lower at 14,742.42. Australia's S&P/ASX 200 fell 0.4 percent to 5,276.70. Benchmarks in Indonesia, New Zealand, Thailand, the Philippines and Singapore fell. India's benchmark Sensex dropped 2.2 percent to 20,203.96 after the country's central bank unexpectedly raised interest rates in a bid to lower inflation.
Besides keeping an eye on the Fed, investors will also likely focus on political fighting between the White House and Congress over the approaching debt ceiling. It must be raised by Oct. 1 to avoid a government shutdown. Failure to do so could lead to the first-ever national default in U.S. history.
Market volatility will increase as the deadline approaches, said Evan Lucas of IG in Melbourne, Australia.
"This is the next key thing," Lucas said. "A lot of people are looking for a reason to sell."
Benchmark oil for October delivery was down $1.07 to $105.32 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.68 to close at $106.39 a barrel on Thursday.
In currencies, the euro was down 0.1 percent to $1.3520, while the dollar was flat at 99.43 yen.