LONDON (AP) — The mood in markets turned positive Wednesday after remarks from U.S. Federal Reserve chairman Ben Bernanke raised the prospect that the central bank's monetary stimulus may stay in place a little longer than expected.
In prepared remarks to lawmakers in Congress, Bernanke said the Fed's timetable for reducing its bond purchases is not on a "preset course" and that it could actually increase them if economic data disappoints. Specifically, he said the Fed wants to see substantial progress in the job market before scaling back the bond purchases.
Bernanke, who was taking questions from lawmakers, also said that the Fed's main interest rate, the Fed funds rate, will stay at its current very low levels after the monetary stimulus comes to an end.
The Fed is currently spending $85 billion a month buying financial assets in the markets in order to lower long-term borrowing rates and shore up the U.S. recovery.
In recent weeks, the expectation had been that the Fed might start the so-called tapering in September but a recent run of uninspiring U.S. economic figures have put that assumption into question. Bernanke's comments appeared to confirm the expectation that any change will depend on economic data and not be constrained by the calendar.
The response was relief in stock and bond markets.
"Unconvinced that the economy has turned the corner toward stronger growth, Bernanke is in no rush to pull back on the monetary throttle," said Sal Guatieri, senior economist at BMO Capital Markets.
In Europe, the FTSE 100 index of British shares rose 0.2 percent to close at 6,571.93 while Germany's DAX rose 0.7 percent to 8,254.72. The CAC-40 in France ended 0.6 percent higher at 3,872.02.
In the U.S., the Dow Jones industrial average was flat at 15,449.09 while the broader S&P 500 index rose 0.2 percent to 1,679.57.
Wall Street was also buoyed by strong earnings from big companies, such as Bank of America, which reported an unexpectedly large increase in profits in the second quarter.
The dollar recovered from an early drop. As well as boosting stock markets, the Fed's monetary stimulus over the past few years has largely kept a lid on the dollar, so the prospect that the policy will remain intact has the potential to weigh on the currency. The euro was down 0.5 percent at $1.3095 while the dollar was 0.6 percent higher against the Japanese yen, at 99.70 yen.
How the rest of the trading session turns out could hinge on Bernanke's exchanges with lawmakers to Congress. Unlike last time he went before them — and spooked markets by signaling the Fed was planning to ease its stimulus — few think he will stray from the written comments he delivered earlier in the day.
"Presumably, he will remain 'on message' during the Q&A session, and confusion will not reign," said Joshua Shapiro, chief U.S. economist at MFR Inc.
Earlier in Asia, China's Shanghai Composite Index fell 1 percent to 2,044.92 while Tokyo's Nikkei 225 gained 0.1 percent to 14,615.04. Hong Kong's Hang Seng rose 0.3 percent to 21,371.87 and Seoul's Kospi added 1.2 percent to 1,889.50. B
Oil prices recovered some earlier losses with the benchmark New York rate down 4 cents at $105.96 a barrel.