Bernanke Comments Drive U.S. Indexes Higher

Bikram Pandey
27 Aug, 2010
New York City

U.S. stocks picked up momentum after Fed Chairman indicated economic recovery is likely to pick up as conditions improve. U.S. revised second quarter GDP estimate downward to 1.6% from advance estimate of 2.4%. Oil, copper, lead and zinc gained more than 2%, tracking stocks.

[R]4:00 PM New York – U.S. stocks picked up momentum after Fed Chairman indicated economic recovery is likely to pick up as conditions improve. U.S. revised second quarter GDP estimate downward to 1.6% from advance estimate of 2.4%. Oil, copper, lead and zinc gained more than 2%, tracking stocks.[/R]

Fed Chairman Bernanke noted in a statement release at a gathering of annual of central bankers that private final demand appears to be weak than expected as households are cautious and are repairing their financial position. With the elevated joblessness and restrained spending, economic recovery appears to be weaker than anticipated.

Chairman Bernanke also indicated that economic growth is expected to pick as “preconditions” are in “place” and the Fed “will do will certainly use its tools as needed to maintain price stability” and “to promote the continuation of the economic recovery.”

U.S. stocks advance after GDP expanded a downwardly revised 1.6% in the second quarter. 3PAR accepted Dell’s increased offer of $27 a share. Boeing postponed delivery schedule of 787. Automakers in Japan reported surge in global production for July.

3PAR surged more than 30% after Hewlett Packard lifted its bid to $30 a share. J Crew Group Inc declined after it lowered its annual earnings outlook. Tiffany & Company declined after it reported sales that missed analysts’ expectations. Aruba Networks, Inc. fourth quarter net soared 45% and break even in the quarter. International Rectifier Corp fourth quarter net was flat.

The European indexes gained and German import price inflation rose in July. Spanish retail sales fell in the month after VAT increase. Greek PPI slackened in July. ING Groep agreed to sell 50% stake of ING Summit to Canadian JV.

The UK indexes rose after an upwardly revised GDP growth of 1.2% in the second quarter and service sector index rose 1.4%. Irish trade surplus narrowed in June. Exports increased 1% on an annual basis to €7.27 billion in June, while imports grew 9% to €4.5 billion.

The benchmark index in Japan dropped to a new intra-day low but managed to gain nearly 1% by close. For the week the index declined 2.1%. Core consumer price index fell for the seventeenth month in a row. Unemployment rate dropped in July. Toyota recalls extends to Corollas.

Stocks in China moved sideways to close marginally higher. China’s fiscal revenue for the first half rose 25.7% to 5 trillion yen. PetroChina second quarter net increased less than expected 4%. China Unicom first half net plunged 62% on 3G roll out expenses.

The benchmark index in Mumbai dropped 1.3% in a volatile trading with the index declining 2.2% in the week, largest weekly drop this quarter. Coal India begins search for anchor investors. Ranbaxy settles patent issue with Roche Eximbank sanctions loan to Reliance Power for Sasan plant.

Stocks in Australia rallied to gain modestly. Availability of residential rental property rises in Sydney to a 12-month high. Canadian Pension Board agrees to buy Intoll for A$ 3.44 billion. Newcrest Mining gets closer to acquiring Lihir Gold.

Commodities, Currencies and Yields

Dollar edged lower against euro to $1.273 and gained against the Japanese yen to 85.34.

Crude oil increased $1.79 to $75.15 a barrel for a front month contract, natural gas edged lower 21 cents to $3.83 per mBtu and gasoline increased 4.26 cents to 195.11 cents.

Gold decreased $0.10 in New York trading to close at $1,237.60 per ounce, silver increased $0.08 to $19.10 per ounce and copper for the front month delivery increased 6.85 cents to $3.39 per pound.

Yields on 10-year U.S. bonds increased to 2.65% and on 30-year U.S. bonds yields gained 3.69%.