World stocks recover after Bernanke comments

AP News
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Posted: Aug 26, 2011 12:12 PM
World stocks recover after Bernanke comments

European and U.S. stocks recovered earlier losses Friday after Federal Reserve Chairman Ben Bernanke signaled no new steps to boost the U.S. economy, but urged the government to help out.

In a highly anticipated speech at a conference in Jackson Hole, Wyoming, Bernanke did not suggest that the Fed might embark on a new round of bond-buying to increase money supply in the economy.

He did, however, suggest that the central bank would keep its options open and indicated the U.S. government may need to act to stimulate hiring and growth.

The Fed has already pledged low interest rates through to 2013. Some central bank watchers say the Fed has reached the limits of what a central bank can do to aid an economy that is beleaguered by problems that monetary policy can't fix _ high unemployment and massive government debt.

"He appears to be saying that the politicians need to start pulling their weight," said Paul Dales, Senior U.S. economist at Capital Economics.

After being sharply lower in the afternoon in Europe, Britain's FTSE 100 ended the day flat at 5,129.92 while Germany's DAX shed 0.8 percent to 5,537.48. France's CAC-40 closed 1.0 percent lower at 3,087.64.

Wall Street recovered from losses to trade higher, with the Dow industrials up 1.1 percent at 11,270.35 and the S&P 500 up 1.3 percent at 1,173.90.

Market sentiment had been hurt earlier by figures showing the slowdown in the U.S. is occurring faster than predicted.

The Commerce Department said the U.S. economy grew in the April-June quarter at a 1 percent annual rate, down from an earlier estimate of 1.3 percent and below analyst expectations for a 1.1 percent reading. The data renewed concerns that the U.S. might be headed for another recession.

By Bernanke's suggestion that the U.S. government might provide economic support restored traders' confidence.

In Asia, Japan's Nikkei 225 swung between gains and losses throughout the day before closing with a 0.3 percent gain at 8,797.78. South Korea's Kospi rose 0.8 percent after a volatile morning to 1,778.95.

Hong Kong's Hang Seng gave up early gains and fell 0.9 percent to 19,582.88. Benchmarks in Australia, Singapore and the Philippines were also lower while stocks in mainland China were mixed.

Worries that the U.S. could be headed for another recession have in recent weeks caused huge volatility in equities, bonds and foreign exchange.

On Thursday, Germany's main index suffered a flash slide _ about 4 percent in 15 minutes _ that analysts and traders were at a loss to explain but which dented investor confidence in other global markets.

Bank stocks, meanwhile, got some support from news that billionaire investor Warren Buffett will invest $5 billion in troubled Bank of America, the largest U.S. bank. Those gains, however, did not last long as the wider market fell.

Mainland Chinese shares were mixed with the benchmark Shanghai Composite Index edging 0.1 percent lower to 2,612.19, after dipping almost 1 percent earlier in the day. The smaller Shenzhen Composite Index gained 0.3 percent to 1,169.95.

In currency trading, the euro rose to $1.4464 from $1.4368 late in New York on Thursday. The dollar slipped to 76.62 yen from 77.55 yen.

Benchmark oil for October delivery was down 36 cents at $84.94 in electronic trading on the New York Mercantile Exchange. Crude rose 14 cents to finish at $85.30 on Thursday. In London, Brent crude for October delivery was up 10 cents to $110.72 on the ICE Futures exchange.

Traders were watching the violence in Libya for any signs that the country might stabilize and start working on restoring some of the 1.6 million barrels of oil it used to produce before its civil war erupted.

That and fears of a global economic slowdown have weighed on oil prices in recent days.

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Pamela Sampson in Bangkok and Fu Ting in Shanghai contributed to this report.