Markets resilient despite Bernanke testimony
LONDON — Markets were resilient Wednesday as investors continued to hope the U.S. Federal Reserve would provide new monetary stimulus even though its chairman, Ben Bernanke, gave no indication that any action was imminent.
In testimony to Congress on Tuesday, Bernanke was fairly downbeat about the U.S. economy. He did not signal any new stimulus was being considered, though he said the Fed was still looking at “ways to address the weakness in the economy should more action be needed to promote a sustained recovery in the labor market.”
The stock market’s initial reaction to Bernanke’s testimony was to drop. However, it stabilized later as many investors think the Fed may at least discuss further action at its next policy meeting in a couple of weeks.
“Market participants parsed his words, and weighed the probability of further large scale asset purchases,” said David Morrison, senior market strategist at GFT Markets.
The Fed has already completed two programs of asset purchases, which have the effect of increasing the supply of money. That in turn should increase the flow of credit, helping economic activity.
Renewed hope for more such help supported markets, as did positive earnings statements from Goldman Sachs, Coca Cola and Yahoo.
They helped offset a gloomy after-hours statement from Intel Corp., the world’s largest chipmaker. It said its revenue for the current quarter is likely to come in below market forecasts and the stock is expected to open around 10 percent lower on Wednesday.
U.S. earnings statements will remain a focus of attention later. Those expected to report later include Abbott Laboratories, Bank of America, Honeywell, American Express and IBM.
By late morning in Europe, the FTSE 100 index of leading British shares was flat at 5,632 while Germany’s DAX rose 0.1 percent to 6,580. France’s CAC-40 was 0.5 percent higher at 3,192.
The euro was down 0.5 percent as it continued its choppy trading in the wake of Bernanke’s comments. As he spoke, it fell below $1.22 but the market reassessment helped it bounce back above $1.23 for a while.
Wall Street was poised to lose half of the previous day’s gains, with both the Dow futures and the broader S&P 500 futures down 0.3 percent.
As well as monitoring Bernanke’s second day of testimony and the next round of earnings, investors will be keeping a close watch on developments in Europe in the run-up to Friday’s conference call of the 17 euro finance ministers. The ministers are expected to back the release of the first batch of funds for the bailout of Spain’s banks.
“Concerns about Europe appear to be background noise at the moment, everyone knows it’s there, it’s just people’s attention is elsewhere for now,” said Michael Hewson, senior market analyst at CMC Markets.
Earlier in Asia, Hong Kong’s Hang Seng fell 1.1 percent to 19,239.88 and South Korea’s Kospi dropped 1.5 percent to 1,794.91. Japan’s Nikkei 225 shed 0.3 percent to 8,726.74 but China’s Shanghai Composite Index gained 0.4 percent to 2,169.10.
Oil prices drifted lower, with benchmark crude for August delivery down 49 cents at $88.73 in electronic trading on the New York Mercantile Exchange.