Global stocks, oil, euro up after Bernanke economy view

Tue Jul 17, 2012 5:34pm EDT
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By Wanfeng Zhou

NEW YORK (Reuters) - World stocks and oil prices rose in choppy trade on Tuesday after a gloomy economic outlook by Federal Reserve Chairman Ben Bernanke kept alive views that the U.S. central bank may take further steps to stimulate growth.

Shares and oil had come under pressure earlier in the session, while the U.S. dollar rallied after Bernanke dampened hopes the Fed was moving closer to a third round of bond buying to bolster flagging growth.

But markets reversed course as reactions to Bernanke's testimony before Congress changed. Analysts said the Fed chief's comments on the economy, especially on the jobs market, suggested the central bank was leaving the door open for further monetary stimulus.

Bernanke said policymakers would consider a range of tools to further stimulate growth if it became clear the labor market was not improving or if deflation risks mounted.

"We do expect the Fed to launch QE3 possibly by as early as August," said Oliver Pursche, president at Gary Goldberg Financial Services in Suffern, New York. "The only game in town to revive or raise GDP growth is the Fed."

U.S. stocks closed higher. The Dow Jones industrial average .DJI finished up 78.33 points, or 0.62 percent, at 12,805.54. The S&P 500 Index .SPX ended up 10.03 points, or 0.74 percent, at 1,363.67. The Nasdaq Composite Index .IXIC closed up 13.10 points, or 0.45 percent, at 2,910.04.

Coca-Cola (KO.N: Quote) and Goldman Sachs (GS.N: Quote) joined the growing roster of S&P companies that beat profit forecasts and helped boost equities.

Bernanke also told the Senate Banking Committee the U.S. economic recovery was being held back by anxiety over Europe's debt crisis and the path of U.S. fiscal policy.   Continued...

Traders look at a computer screen at Madrid's bourse April 5, 2012. REUTERS/Susana Vera