Stock markets rise on US data, Fed comments

CARLO PIOVANO - AP Business Writer
AP
A trader works on the floor of the New York Stock Exchange on Friday, Aug. 26, 2011 in New York. (AP Photo/Jin Lee)

LONDON (AP) — World stock markets rose Monday, heartened by Federal Reserve chief Ben Bernanke's call for the government to help the economy and upbeat figures on U.S. consumer spending.

While Bernanke announced no new stimulus measures — as some investors had hoped — in his speech in Jackson Hole, Wyoming, he did leave open the possibility of more action if another U.S. recession looked likely.

He also emphasized the strengths of the U.S. economy, said the job market will recover in the long run and called on government policies to support growth more.

"People came to realize that Bernanke is very confident about the economy," said Jackson Wong, vice president at Tanrich Securities in Hong Kong. "People were reluctant to get into the market. Now they are jumping back in."

Official data on U.S. personal spending — which rose by a better-than-expected 0.8 percent in July — supported stocks in early trading. The figures suggest the world's largest economy is not slowing as rapidly as some had feared.

U.S. markets were also relieved by the fact that Hurricane Irene wound up being less severe than many analysts had anticipated, despite the fact that it killed two dozen people, caused wide flooding and disrupted power lines along the U.S. East Coast.

Germany's DAX ended the day 2.4 percent higher at 5,672.37, while France's CAC-40 rose 2.2 percent to 3,155.61. Britain's financial markets were closed for a national holiday.

Asia closed higher and Wall Street rose on the open. The Dow industrials rose 1.6 percent to 11,460.42 while the S&P 500 gained 1.9 percent to 1,199.30.

Despite Monday's gains, analysts warned market sentiment will remain fragile as economic indicators this week are expected to show slowing global growth and the eurozone's debt crisis is generating uncertainty in European markets again.

Talks are continuing on Finland's request for collateral in exchange for rescue loans to Greece, and other countries have demanded similar conditions if Finland's deal goes through. That would eat into the value of Greece's €109 billion ($157 billion) second rescue package and undermine the government's capacity to get the country back on its feet.

The European Union's top economic official warned Monday that the recent turmoil on financial markets threatens economic recovery in the region.

In testimony to the European parliament, EU Monetary Affairs Commissioner Olli Rehn conceded that as a result of the market volatility, the Commission was due to lower its growth forecasts in a report on Sept. 15.

Still, European debt crisis concerns did not hurt the euro, which typically gains support when stock markets rise and investors' appetite for risk improves.

On Monday, it was up at $1.4511 from $1.4484 in late trading in New York. The dollar rose to 76.95 yen from 76.66 yen.

In Asia, Japan's Nikkei 225 rose 0.6 percent to close at 8,851.35 amid news that the country's ruling party elected Finance Minister Yoshihiko Noda its new chief, paving the way for him to be the next prime minister. Australia's S&P/ASX 200 gained 1.5 percent to 4,263.30 and Hong Kong's Hang Seng rose 1.4 percent to 19,865.11.

South Korea's Kopsi index jumped 2.8 percent to 1,829.50.

Mainland Chinese shares lost ground, with the benchmark Shanghai Composite Index falling 1.4 percent to 2,576.41. The Shenzhen Composite Index slipped 0.9 percent, to 1,159.52.

Benchmark oil for October delivery was up $1.71 to $87.08 in electronic trading on the New York Mercantile Exchange. Crude rose 7 cents to settle at $85.37 on Friday.

In London, Brent crude for October delivery was up $.121 at $112.57 on the ICE Futures exchange.

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Pamela Sampson in Bangkok and Fu Ting in Shanghai contributed to this report.