CORRECTED-GLOBAL MARKETS-U.S. dollar falls, bonds rise on Fed minutes, Bernanke comments

Wed Jul 10, 2013 6:35pm EDT

(Corrects headline to match first paragraph)
    * Bernanke says Fed still to pursue accommodative policy
    * Fed minutes show policymakers divided on need for slowing
bond purchases
    * U.S. oil surges, gains on Brent as crude inventory shrinks

    By Herbert Lash
    NEW YORK, July 10 (Reuters) - The U.S. dollar fell and
Treasury debt prices rose on Wednesday after the minutes of the
Federal Reserve's meeting in June showed policymakers wanted
lower unemployment before slowing bond purchases.
    Comments by Fed Chairman Ben Bernanke late in the day
spurred a further fall in the dollar and gains in bond futures,
while U.S. stock futures also rose after stocks had ended little
changed. 
    Bernanke said the Fed would continue to pursue a highly
accommodative monetary policy for now as inflation remains low
and the employment rate may be overstating the health of the
labor market. 
     "Bernanke emphasized some of the risks to the U.S. economy,
leading the U.S. dollar lower, with dollar/yen a good example,"
said Sebastien Galy, foreign exchange strategist at Societe
Generale in New York. 
     The dollar fell to the day's lows against both the euro and
yen after Bernanke's comments, with the euro trading
around $1.2986 and the dollar at 99.65 yen. 
     The dollar index, which tracks the greenback against
a basket of six currencies, was last down 1.4 percent at 83.435,
retreating from a three-year high at 84.753 touched on Tuesday. 
     The minutes of the Fed meeting showed that even as
consensus built within the Fed in June about the likely need to
begin pulling back on economic stimulus measures soon, many
officials wanted more reassurance the employment recovery was on
solid ground before a policy retreat.
     "The minutes were not as hawkish as expected," said Joseph
Trevisani, chief market strategist at WorldWideMarkets, in 
Woodcliff Lake, New Jersey. 
    The U.S. benchmark 10-year Treasury note was up
3/32 in price, its yield easing to 2.626 percent, in late trade
after Bernanke's comments. 
    "Even though the minutes were more dovish than expected,
their impact was somewhat discounted by the continued strength
in the labor market that was seen after the Fed's last meeting,"
said Jake Lowery, Treasury trader at ING Investment Management
in Atlanta, Georgia. 
    Since the June Federal Open Market Committee meeting and an
upbeat June payrolls report last Friday, Treasury yields have
climbed and were at 23-month highs on Monday before they
retreated on Wednesday.
    
    U.S. STOCKS END STEADY, FUTURES RISE LATE 
    The Dow Jones industrial average slipped and the S&P 500
stock index ended little changed, interrupting a four-day rally,
with investors trying to gauge when the Federal Reserve may
scale back on its economic stimulus. 
    The Dow Jones industrial average dipped 8.68 points,
or 0.06 percent, to end at 15,291.66. The Standard & Poor's 500
Index inched up just 0.30 of a point, or 0.02 percent, to
finish at 1,652.62.   
    The S&P 500 has risen more than 2.0 percent over the
past five sessions, pushing the benchmark index to near its
all-time closing high of 1,669.16.  
    Investors were more encouraged by the comments from Bernanke
after the market close suggesting that the Fed would "push back"
if financial conditions tightened so much as to threaten the
economy's progress.
    Bernanke's comments sent U.S. stock index futures higher
after the close of regular trade. S&P 500 stock futures rose
about 0.6 percent after Bernanke spoke, while Nasdaq futures
rose more than 1.0 percent.
    "That is calming market fears," said Tim Ghriskey, chief
investment officer of Solaris Group in Bedford Hills, New York,
referring to Bernanke's comments on the labor market.  
    Bernanke spooked investors last month when he said the
economy's expansion was strong enough for the central bank to
start slowing the pace of its bond purchases later this year. 

    WEAK CHINA TRADE DATA 
    Earlier in the day weak data from China and a credit ratings
downgrade of Italy curbed investors' enthusiasm for equities on
major world bourses.
    After a five-day run of gains for world share markets
 and the dollar's surge to a three-year high,
investors were booking profits and squaring positions.
    MSCI's world equity index was up only 0.34
percent, helped by a late rally in Chinese shares sparked by
talk of a policy easing to offset slowing economic growth.
 
    The broad FTSEurofirst 300 index of leading
regional European companies ended up just 0.09 percent at
1,190.02 after data showing China's exports fell for the first
time in 17 months was followed by soft manufacturing data from
France, the Netherlands and Greece.
    China warned of a "grim" outlook for trade after data showed
exports fell 3.1 percent in June, confounding forecasts for a 4
percent rise. However, the data fueled talk that China's central
bank may ease policy in an effort to boost growth.
  
    U.S. crude oil prices surged nearly $3 a barrel to their
highest in 16 months, narrowing the discount to Brent crude to
less than $2 after U.S. data showed the biggest two-week decline
in crude stocks on record.
    Oil inventories plunged about 10 million barrels for a
second week in a row, highlighting the unexpectedly rapid
tightening of the market after three years of pent-up supply due
to a dramatic resurgence in domestic production. 
    U.S. crude rose $2.99 to settle at $106.52 a barrel,
while Brent gained 70 cents to settle at $108.51.
     
 

 (Additional reporting by Marc Jones in London; Editing by
Bernadette Baum, James Dalgleish, G Crosse and Dan Grebler)
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