World markets rally on Fed vow to do more

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By SARAH DiLORENZO, Associated Press

PARIS (AP) — World stock markets rallied Friday after Federal Reserve Chairman Ben Bernanke promised that the central bank could do more to stimulate the U.S. economy.

European stocks had led the way higher in the early afternoon after a European Central Bank official said the bank was getting ready to give relief to European countries struggling with high borrowing costs by buying up their bonds.

In France, the CAC-40 rose 1 percent to close 3,413.07, while Germany's DAX moved up 1.1 percent to 6,970.79. The FTSE index of British shares initially followed the trend, but then reversed in late trading, possibly because Bernanke's speech lacked detail. The index closed down 0.1 percent at 5,711.48.

The euro shot up past $1.26 at one point for the first time in over a month; by late afternoon, it was at $1.2565.

The boost came after Bernanke spoke at an economic forum in Jackson Hole, Wyoming. Expectations for new stimulus had been low after an economic survey earlier in the week sounded a fairly positive note.

But Bernanke said Friday that because U.S. unemployment is so high, the Fed would do more to boost the economy, calling the recovery "far from satisfactory."

He added that the central bank "should not rule out" new policies to improve the job market.

After a cautious open, Wall Street shot up.

In early afternoon trading in New York, the Dow Jones industrial average was up 0.83 percent to 13,090, while the broader Standard & Poor's index gained 0.8 percent to 1,410.

"Bernanke left the door wide open to more QE (quantitative easing)," said Alan Ruskin, an analyst with Deutsche Bank. "He made strong arguments for its effectiveness, went through a list of potential criticisms that were largely dismissed or characterized as containable."

Investors had spent more of the week just waiting for Bernanke's comments — and not too hopeful for them. As a result, stocks were lackluster earlier in Asia.

Tokyo's Nikkei 225, shed 1.6 percent to 8,839.91 points. China's benchmark Shanghai Composite Index was off 0.3 percent at 2,047.52 and Hong Kong's Hang Seng declined 0.4 percent to 19,482.57.

The rally in Europe rubbed off on oil prices. Benchmark oil for October delivery rose $1.69 to $96.31 per barrel in electronic trading on the New York Mercantile Exchange.

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