Bernanke continues to give world stocks a lift

LONDON — World stock markets rose Monday after upbeat comments from Federal Reserve chairman Ben Bernanke and further signs of an improvement in the U.S. housing market.

By (AP)

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Published: Mon 24 Aug 2009, 7:34 PM

Last updated: Thu 2 Apr 2015, 3:46 AM

In Europe, the FTSE 100 index of leading British shares was up 20.74 points, or 0.4 percent, to 4,871.63 while Germany’s DAX rose 28.16 points, or 0.5 percent, to 5,490.90. The CAC-40 in France was 21.93 points, or 0.6 percent, higher at 3,637.74.

Wall Street was also poised to open modestly higher. Dow futures were up 24 points, or 0.3 percent, to 9,513 while the broader Standard & Poor’s 500 futures rose 1.7 points, or 0.2 percent, to 1,026.90.

The gains were smaller than those recorded in Asia, where investors took their cue from Europe and the U.S. on Friday, when optimism was buoyed by Bernanke’s comments that prospects for a near-term economy recovery in the U.S. and around the world appeared good. Also boosting confidence was a better-than-expected rise in U.S. home sales last month that helped relieve some of the fears about American consumers that have held stock markets down lately.

“We’ve seen a wave of good sentiment flooding the markets since the chairman’s upbeat comments built on a positive move in U.S. home sales,” said Philip Gillet, a sales trader at IG Index.

Investors will be focusing on U.S. economic data this week, most notably consumer confidence figures from the Conference Board on Tuesday. In particular, they will be looking to see if ongoing increases in unemployment more than offset hopes of an improvement in the wider economy.

Investors are fully aware that without the support of the U.S. consumer, which accounts for around 70 percent of the U.S. economy and 20 percent of the global economy, recovery will be muted at best.

“Everything depends on the consumer and it is difficult to see how the consumer can start to recover in the face of falling wage growth, the lagged shocks from the sharp reduction in household wealth and the need to lower debt levels in the face of still tight lending conditions,” said Neil Mackinnon, chief economist at ECU Group.

Also key to the outlook for equities is how many investors feel when they return from their summer holidays — whether they think that the rally in stocks since March has further to run or that it has gone too far considering the lingering fragility of the global economy.

Since March, the S&P 500 has risen 52 percent, making the rally bigger and longer than any since 1929-32, in the wake of the Wall Street crash.

One thing is likely though — volumes will pick up from the traditional summer lull even though the financial crisis may have structurally altered the underlying trading environment.

Gareth Berry, an analyst at UBS, said volumes have increased every year during the past decade between the final week of August and the first three weeks of September. In some cases the increase has been rather dramatic.

Earlier in Asia, Japan’s Nikkei 225 stock average gained 342.85 points, or 3.4 percent, to 10,581.05, while China’s main Shanghai index was up for a third straight day, gaining 1.1 percent to 2,993.43, after sharp falls last week triggered selling around the world. Hong Kong’s Hang Seng added 1.7 percent to 20,535.94.

Elsewhere in Asia, South Korea’s Kospi advanced 2 percent to its best finish in 13 months. Taiwan’s index jumped 2.8 percent and Australia’s benchmark was 3.2 percent higher. Thailand shares rose 1.7 percent.

Oil prices held steady around the $74 a barrel mark amid the bright equities backdrop. Crude for October delivery was up 8 cents at $73.97 a barrel. On Friday, it jumped 98 cents to settle at $73.89, its highest close since October.

The dollar rose 0.4 percent to 94.73 yen while the euro fell 0.1 percent to $1.4322.

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