July 17, 2012 / 4:45 PM / 5 years ago

GLOBAL MARKETS-Stocks higher, dollar gains after Bernanke

4 Min Read

* Bernanke: Fed prepared to do more, but offers few details

* U.S. dollar broadly higher; euro slumps

* U.S. stocks recover from post-Bernanke fall; Europe ends lower

By Wanfeng Zhou

NEW YORK, July 17 (Reuters) - World stocks edged higher in choppy trade o n T uesday and the U.S. dollar gained after Federal Reserve Chairman Ben Bernanke said the central bank stands ready to take further steps to stimulate the economy but stopped short of signaling any near-term action.

Financial markets had looked forward to Bernanke's testimony to Congress for any signs the Fed was moving closer to a third round of bond buying to support the economy. But the Fed chief hewed closely to the message of watchful waiting that the central bank's policy panel delivered in June, and yielded few new clues.

U.S. stocks initially fell after Bernanke disappointed investors who had hoped for a specific time frame for more stimulus. But they recovered in midday trading, led by shares of materials producers.

"For stimulus junkies, as we call them, they wanted more clear signs of (asset purchases). They didn't get that and the market dropped," said Joe Saluzzi, partner at Themis Trading in Chatham, New Jersey, speaking of the Fed's program that has previously lifted equity and commodity prices.

Bernanke told the Senate Banking Committee the U.S. economic recovery was being held back by anxiety over Europe's debt crisis and the path of U.S. fiscal policy.

The Dow Jones industrial average rose 56.95 points, or 0.45 percent, at 12,784.16. The Standard & Poor's 500 Index was up 6.12 points, or 0.45 percent, at 1,359.76. The Nasdaq Composite Index was up 9.15 points, or 0.32 percent, at 2,906.09.

A measure of world stock markets was up 0.3 percent to 310.42 after touching a one-week high.

European shares dropped 0.2 percent to close at 1,041.53.

Dollar Strength

The dollar index, which tracks the greenback versus a basket of six currencies, rose 0.2 percent to 83.287, rebounding from a session low 82.911, the weakest in more than a week.

"My view remains that the Fed will be reluctant to act aggressively as other central banks across the world pick up the easing torch and use it to stoke the fire of global demand," said Andrew Busch, global currency strategist at BMO Capital Markets in Chicago. Central banks in Europe, the UK, China and Brazil have announced looser monetary policies, underscoring the scope of the economic slowdown worldwide.

The euro hit a session low of $1.2187 on Reuters data after Bernanke's comments and last traded down 0.3 percent at $1.2234. It had earlier hit a one-week high of $1.2315 shortly after the release of the German ZEW survey, which was not as weak as some had feared.

The euro also hit a 3-1/2-year low vs sterling at 78.27 pence,, dropping to a record trough against the Australian dollar at A$1.18988.

Spain sold 3.56 billion euros ($4.36 billion) of short-term debt, just above its target range, and debt costs dipped from a month ago, although they remained at high levels as investors speculated Madrid will ultimately need a sovereign bailout.

Spain faces a tougher test on Thursday when it auctions up to 3 billion euros of medium and longer-dated bonds, with its 10-year bond yields edging close to the 7 percent level widely seen as unsustainable for a country's finances.

The dollar gained 0.1 percent to 78.97 yen, a day after dropping to a one-month low, after Japan's finance minister said the yen's rise does not reflect Japan's fundamentals and hinted that the government is prepared to intervene to stem excessive moves.

In commodities trading, Brent futures rose 36 cents per barrel to $103.73 for a fourth straight day of gains. U.S. crude was up 2 cents to $88.45.

Spot gold fell to around $1,580 an ounce.

Longer-dated Treasury prices briefly erased losses after Bernanke's testimony. Benchmark 10-year Treasury notes were last down 7/32 in price, yielding 1.4926 percent.

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