LONDON-Global markets turned lower yesterday after Federal Reserve Chairman Ben Bernanke gave a gloomy assessment of the economy but offered no hint that the central bank might offer new monetary stimulus. In his semiannual report before Congress, Bernanke said the US economy has weakened and repeated that the Fed, as usual, is ready to take action to bolster growth if needed. However, he provided no clues about what steps the Fed could take or whether any action was coming soon.
The comments disappointed investors, who were hoping Bernanke would sound more aggressive about helping the US economy, which is struggling to create jobs. "Bernanke ... offered no hint that the FOMC was close to launching a third round of large-scale asset purchases," said Paul Ashworth, analyst at Capital Economics.
Such purchases would boost the amount of money in the US economy, fuelling the flow of credit, which should increase economic activity. In Europe, Germany's DAX was up slightly, 0.18 per cent at 6,577 and France's CAC-40 was barely changed on the day, off 0.09 per cent to 3,176. London's FTSE 100 lost 0.59 per cent to 5,629. The euro was down 0.11 per cent at $1.2253.
Wall Street opened higher with the Dow industrial average and the S&P 500 both up 0.5 per cent, at 12,792 and 1,360, respectively. Among the few stocks to rise were Goldman Sachs and Coca-Cola Co., which posted upbeat second-quarter earnings. Confidence in the world economy has been shaken in recent weeks as the three largest economies-the US, China and the 17-country eurozone-have shown increasing signs of weakness.
In China, the world's second-largest economy, investors likewise hope monetary authorities will provide relief after second-quarter annual growth fell to a three-year low of 7.6 per cent. Expectations of a further stimulus in China have risen after Premier Wen Jiabao's weekend promise of tax breaks and other aid to struggling small businesses.
AP
