China soothes, euro crisis haunts, Bernanke ahead
By Jeremy Gaunt, European Investment Correspondent
LONDON (Reuters) - Soothing data about China's economy provided some succor to investors on Wednesday although Europe's debt crisis rolled on with Irish government bond yields hitting record highs after a downgrade to junk.
Wall Street looked set to open higher with focus on testimony from U.S. Federal Reserve Chairman Ben Bernanke.
Following minutes of the Fed's latest meeting which suggested the possibility of more stimulus measures, Bernanke is likely to be asked why the Fed's current stimulus measures have not been more effective at bringing down unemployment.
European shares recovered after the previous session's losses, helped by a better-than-expected China second-quarter GDP reading, which also lifted oil and commodity prices, while the euro reversed some of its recent weakness against the dollar.
Moody's downgraded Ireland's credit rating to junk status on Tuesday, the latest in a series of blows to European economies struggling to get out from under a huge debt mountain. The Irish 10-year bond yield rose above 14 percent.
The rating agency warned that Ireland would probably need a second bailout. A week ago, it slashed Portugal's rating to junk status with a similar warning.
Investors are also beginning to fear that the euro zone debt crisis is spreading from the bloc's small economies to the larger ones.
The International Monetary Fund called on Tuesday for "decisive implementation" by Italy to cut its public debt as the country sought this week to calm market worries about the sustainability of its debt burden, which amounts to 120 percent of GDP. Continued...