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Aug 27, 2010 12:11 PM by Letitia Walker

Bernanke comments give world markets a boost

LONDON (AP) - Stocks rose in Europe and on Wall Street Friday as
Federal Reserve Chairman Ben Bernanke said his central bank stands
ready to support the U.S. economy if needed and after a key growth
figure came in better than feared.
Global markets have been rattled in recent weeks by signs that
growth is losing momentum, particularly in the world's largest
economy. On Friday, official data showed U.S. gross domestic
product rose by 1.6 percent during the April-June period. That's
way down from the earlier estimate of 2.4 percent but not as bad as
the 1.4 percent expected by economists.
Bernanke acknowlorm d the outlook is uncertain, but said the Fed
could buy more assets - thereby lowering market lending rates and
helping the economy - if indicators deteriorate significantly. He
stressed that the Fed still has plenty of tools with which to help
the economy in case of need.
Released shortly after the U.S. growth data, the comments
further helped sentiment in stock markets.
Britain's FTSE 100 stock index closed up 1.0 percent at
5,209.39, France's CAC-40 rose 0.8 percent to 3,507.44 and
Germany's DAX increased 0.7 percent to 5,951.17.
Gains on Wall Street gathered pace. The Dow industrials average
was up 1.2 percent at 10,100.43 and the Standard & Poor's 500 was
1.1 percent higher at 1,058.52.
Analysts said Bernanke appeared willing to leave the door open
on all options in case growth slows sharply. However, the Fed's
monetary policy tools may not prove very effective.
"In sum, don't expect any Fed action soon," said Paul
Ashworth, analyst at Capital Economics.
The revised U.S. GDP data offered some comfort earlier. Because
investor confidence has been hit by a run of bad data, there was
some apprehension over their publication. While the figures still
portray a slowing recovery, it also calmed the markets' darker
fears.
"There are a couple of encouraging signs in this second
report," Ashworth said.
He noted corporate profits were up and that the downward GDP
revision was mostly due to lower inventory rebuilding and higher
imports. Still, the outlook remains challenging.
"The second quarter wasn't as bad as the headline GDP figure
looks, but, unfortunately, that doesn't mean the third quarter is
going to be any better," Ashworth said.
In Asia, Japan's benchmark Nikkei 225 stock average recovered
from early losses to close 1 percent higher at 8,991.06 on news
that Prime Minister Naoto Kan was meeting reporters to discuss how
the government will handle the yen's surge.
A pledge by Japan's finance minister to work more closely with
the central bank to curb the yen's rise helped boost exporters.
Sentiment was buoyed, also, by the government's report Friday that
the jobless rate in July fell to 5.2 percent from 5.3 percent in
June - the firswayecline in six months.
Chinese investors resumed buying to boost the benchmark Shanghai
Composite Index by 0.3 percent to 2,610.74. But the gains were
capped by mixed earnings from major companies and uncertainty over
whether the government will loosen tight credit policies as the
economy slows.
Hong Kong's Hang Seng fell 0.1 percent to 20,597.35 while South
Korea's Kospi dropped less than 0.1 percent. But shares in most
other markets were higher, with Australia's S&P/ASX 200 up 0.3
percent and Taiwan's benchmark adding 0.4 percent.
In currencies, the dollar rose to 84.99 yen Friday from 84.28
yen in New York late Thursday. The euro rose to $1.2762 from
$1.2702.
Benchmark crude for October delivery was up 64 cents at $74.00 a
barrel in electronic trading on the New York Mercantile Exchange.
The contract settled at $73.36 on Thursday.

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