GLOBAL MARKETS-Shares, euro rise after Bernanke speech

Fri Aug 31, 2012 11:45am EDT

* Bernanke does not explicitly signal imminent monetary easing

* Euro, oil rebound after Nasdaq briefly turns negative

* Gold prices rebound too as Treasury prices gain

By Herbert Lash

NEW YORK, Aug 31 (Reuters) - Stocks and the euro rose on Friday after Federal Reserve Chairman Ben Bernanke kept the door open for future monetary easing, although he did not deliver a clear signal of imminent action during a highly anticipated speech.

The euro and European shares rose as signs emerged of progress toward a deal to tackle the euro zone's debt crisis.

Bernanke told central bankers in Jackson Hole, Wyoming, that progress in bringing down U.S. unemployment was too slow and that the central bank would act as needed to strengthen the economic recovery. But investors focused on what he had to say about monetary policy and the stagnation in the U.S. labor market, which he described as "of grave concern."

Bernanke said the Fed had to weigh the costs as well as the benefits of further stimulus, but he also downplayed potential risks from the unconventional policies. He argued that the Fed's asset purchases had been quite effective at boosting economic growth and fostering job creation.

"I think when he talks about 'grave concern,' that says it all. Further accommodation is coming, it's just a question of how it manifests itself," said Scott Graham, head of U.S. government bond trading at BMO Capital Markets in Chicago.

The Dow Jones industrial average was up 128.09 points, or 0.99 percent, at 13,128.80. The Standard & Poor's 500 Index was up 11.22 points, or 0.80 percent, at 1,410.70. The Nasdaq Composite Index was up 27.79 points, or 0.91 percent, at 3,076.51.

"The basic problem for investors at this point in time is that everyone knows the Fed considers the current economic performance to be unacceptable, but is it unacceptable enough for them to act today or tomorrow before the election?" said Cary Leahy, senior managing director at Decision Economics in New York.

"I don't think this speech answers that question," he said.

The FTSEurofirst 300 index of top European shares was up 0.5 percent, clawing back a short dip after Bernanke's speech, at 1,083.32. An index of world stocks was up 0.7 percent at 322.60.

Bernanke said the Fed would provide additional policy accommodation as needed, a remark that was a somewhat weaker hint of policy easing than the minutes of the Fed's last policy meeting had delivered.

"The market was looking for him to not throw any cold water on the prospects for QE and he didn't throw any cold water on it," said John Canally, investment strategist at LPL Financial in Boston.

"The timing is a little bit iffy, but he didn't come out of the box saying that there has been substantial and sustainable improvement in the economy. Because he didn't do that, I think it's just a matter of time," Canally said.

The euro was up 0.8 percent at $1.2600, while the U.S. dollar index was down 0.7 percent at 81.154.

Investors have hoped that more monetary easing would spur economic growth and support demand for oil, for example.

Brent crude was up $1.16 at $113.81 a barrel, while U.S. crude added $1.62 to $96.24 a barrel.

Treasury prices rose. The benchmark 10-year U.S. Treasury note was up 9/32 in price to yield 1.5977 percent.

Spot gold prices rose $19.16 to $1,674.70 an ounce.