U.S. money managers fear fiscal cliff over weak global growth

— -- NEW YORK -- Japan's main stock market hit a four-month high Wednesday after the country's central bank eased monetary policy to shore up fragile economic growth, but the positive momentum ground to a halt in Europe.

The Bank of Japan said it was increasing its asset purchasing fund to 55 trillion yen ($700 billion) from 45 trillion yen to counter the strength of the Japanese currency. A strong yen makes it more difficult for Japanese companies to compete in international markets.

The Bank of Japan's move comes just days after the Federal Reserve revealed it will purchase an average of $40 billion a month in mortgage-backed securities until the U.S. economy shows significant improvement. The Fed's goal is to lower long-term interest rates and encourage more borrowing and spending. The Fed also said it plans to keep its benchmark short-term interest rate near zero until mid-2015.

Stock markets, which tend to respond favorably to actions targeting economic growth, rallied sharply last week following the Fed's announcement. However, Wednesday, outside of Asia, where Japan's Nikkei 225 stock index rose 1.2% to 9,232.21, its highest close in more than four months, the response to the BoJ move has been far more modest.

"Perhaps we are seeing investors suffering from a bout of central bank fatigue, or perhaps it is a dawning realization that, even with policymakers dispensing cash left, right and center, there is still a slowing global economy to deal with," said Chris Beauchamp, market analyst at IG Index.

And it's not the biggest worry, according to the September Bank of America Merrill Lynch's Fund Manager Survey. For the first time in 18 months, not even Europe's debt crisis is the No. 1 "tail risk" that worry global money managers. (A tail risk is a rare event that could cause stocks to suffer a disproportionate drop.)

The new megarisk is the looming fiscal cliff in the U.S., according to the survey. The realignment in the pecking order of Wall Street anxieties serves as a warning to Main Street investors wondering what could trip up their investment portfolios at a time when stocks are as high as they've been in almost five years.

The fiscal cliff is a potential growth-crimping one-two punch of rising taxes and government spending cuts set to kick in Jan. 1 unless Congress acts to avoid it. The Congressional Budget Office says the U.S. economy will suffer a recession in 2013 if lawmakers fail to act.

In the September poll, 33% of money managers, who invest $681 billion for clients, said the eurozone's debt crisis is their top fear, down from 48% in August. Eclipsing Europe and ascending to the No. 1 global fear was the fiscal cliff, which got a 35% vote.

Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research, says, "The upcoming election is putting these fears into sharper focus."

In the short term, investors likely will focus on government and private data that shows whether the economy is gaining strength. On Wednesday, the main piece of economic data out of the U.S. are reports on new starts for residential housing and existing home sales figures.

Adam Cole, an analyst at RBC Capital Markets, said the reports are "likely to continue the picture of very moderate trend improvement."

Europe's brighter outlook follows steps taken recently by the European Central Bank to stem the crisis. On Wednesday before U.S. markets opened, the FTSE 100 index of leading British shares was flat at 5,871 while Germany's DAX was down 0.1% at 7,342. The CAC-40 in France was also 0.1% lower at 3,508.

Earlier in Asia, stocks were generally fairly buoyant after the Bank of Japan's easing announcement.

Hong Kong's Hang Seng climbed 1.2% to 20,841.91 and Australia's S&P/ASX 200 added 0.5% to 4,418.40. South Korea's Kospi gained 0.2% to 2,007.88. The Shanghai Composite Index rose for the sixth straight trading day, up 0.4% to 2,067.83. The Shenzhen Composite Index gained 0.7% to 865.73.

In currency trading, the BOJ announcement had little impact. The dollar was up only around 0.1% on the day at 78.93 yen. Meanwhile, the euro was more or less flat around $1.30. The euro has enjoyed a stellar few weeks as concerns over Europe's debt crisis have eased somewhat, largely on the back of a new bond-buying plan from the European Central Bank.

In the oil markets the benchmark New York rate was down 37 cents at $94.92 per barrel in electronic trading on the New York Mercantile Exchange.

Contributing: Associated Press