Europe stocks rise on Bernanke comments

Traders work on the floor at the New York Stock Exchange yesterday. US stocks opened higher yesterday after Bernanke’s comments, with the Dow Jones Industrial Average up 0.23% and the Nasdaq Composite Index adding 0.28%.

AFP/London

European shares rose yesterday as investors welcomed a new reassurance by US Federal Reserve chief Ben Bernanke that any tightening of the US easy-money tap would have to wait until economic recovery was firmly underway.

Speaking to US Congress, Bernanke repeated that the Fed stimulus could be wound up next year if economic growth remained steady as forecast. But Bernanke added that tapering the big bond-purchase programme is “by no means” a “preset course”.

At Capital Economics, senior US economist Paul Dales said: “This is not a new development.”

“It was also stressed in the press conference immediately after June’s policy meeting and in the minutes of that meeting. But by saying it again, Bernanke is ensuring that the message is being received loud and clear.”

European markets switched gears with the testimony and at close, London’s FTSE 100 index of leading shares was up 0.24% to end at 6,571.93 points.

Frankfurt’s Dax 30 gained 0.65% to 8,254.72 points and in Paris the Cac 40 rose 0.55% to 3,872.02 points.

In Paris, shares in airline Air France-KLM fell 4.51% to €6.26 after analysts at Morgan Stanley bank lowered their target for the share price.

And shares in giant French cosmetics group L’Oreal fell by 1.13% after the firm reported 4.7% rise in first-half sales which disappointed investors.

The Fed has wrestled with an outsized jump in yields and market interest rates, by more than one percentage point, in the weeks since its path toward reeling in the stimulus became apparent in May.

Markets have tied the eventual drying up of easy-money injections to a likely rise in the benchmark federal funds interest rate, which has been near zero since the end of 2008.

The surge in rates, economists worry, could itself slow the recovery by slowing demand in the recovering housing sector, which has become a key contributor to growth.

US stocks yesterday also opened higher after Bernanke’s comments with the Dow Jones Industrial Average up 0.23% and the tech-rich Nasdaq Composite Index adding 0.28%.

In foreign exchange deals yesterday, the European single currency fell to $1.3095 from $1.3164 late in New York on Tuesday.

And the price of gold rose to $1,297.25 an ounce from $1,291.50 on Tuesday on the London Bullion Market.