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Markets steady despite big slide in Nikkei

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PAN PYLAS | October 25, 2013 07:06 AM EST | AP

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LONDON (AP) — Financial markets outside of Japan were lackluster Friday at the end of a week that's seen the S&P 500 index post a series of record highs and the dollar fall to near two-year lows against the euro.

In Tokyo, the benchmark Nikkei index slid 2.8 percent to 14,088.19 as the dollar fell below its 200-day average of 97.30 yen. A higher yen makes Japanese exports potentially more expensive in international markets and that could hurt growth as well as Prime Minister Shinzo Abe's strategy to reverse two decades of economic stagnation and falling prices.

"We certainly get the sense that the market enthusiasm over 'Abenomics' is waning," said Derek Halpenny, an analyst at Bank of Tokyo-Mitsubishi UFJ.

Elsewhere, investors were largely consolidating recent gains.

In Europe, the FTSE 100 index of leading British shares was up 0.1 percent at 6,716, little affected by news that the British economy grew at a quarterly rate of 0.8 percent in the third quarter. Though that was the highest quarterly rate for over 3 years, it was in line with expectations.

Elsewhere in Europe, Germany's DAX was 0.1 percent lower at 8,975. It too was largely unaffected by a slight weakening in the Ifo survey of German business confidence. More important for the DAX's near-term performance could be whether it manages to break above 9,000 for the first time. The CAC-40 in France was 0.3 percent lower at 4,264.

Wall Street was poised for a steady opening, with Dow futures unchanged and the broader S&P 500 futures 0.1 percent lower.

Now that the uncertainty over the raising of the U.S. debt ceiling has been resolved, albeit only until early next year, investors have focused on other matters, notably when the Federal Reserve will start to reduce its monetary stimulus.

Figures this week — some of which were delayed by the partial government shutdown in the U.S. — have reinforced expectations that so-called "tapering" won't begin until next year. In particular, worse than expected payrolls figures for September helped shore up confidence in stock markets and sent the dollar skidding — the Fed's stimulus effectively creates more dollars, which are then recycled in financial markets.

The dollar was also flat-footed at the end of a week that saw the euro clamber above $1.38 for the first time since November 2011. Europe's single currency was steady Friday at $1.3792, while the dollar fell 0.2 percent to 97.23 yen.

Earlier in Asia, Seoul's Kospi slipped 0.6 percent to 2,034.39 while Hong Kong's Hang Seng fell 0.6 percent to 22,698.34 and China's Shanghai Composite Index was off 1.5 percent at 2,132.96.