August 29, 2011 / 8:00 AM / 6 years ago

GLOBAL MARKETS-Shares rise; dollar dips on stimulus hopes

* U.S. stock futures up 1.0 percent, Asia sees steady gains

* Bernanke leaves door open for further Fed action

* China stocks suffer setback from latest PBOC measures

* Hurricane Irene causes less damage to New York than feared (Updates throughout, changes dateline, prvs HONG KONG)

By Patrick Graham

LONDON, Aug 29 (Reuters) - Global stocks jumped almost one percent on Monday while the dollar struggled after Federal Reserve Chairman Ben Bernanke left the door open for further action to stimulate the U.S. economy and fight unemployment.

World shares rose 0.9 percent, with Asian markets tracking a strong bounce for Wall Street, which closed up 1 percent following Bernanke’s keynote speech in Jackson Hole on Friday.

IMF chief Christine Lagarde also added to market pressure for policymakers to do more to prop up a flagging global economy at the meeting of central bankers, telling officials they must “act now” to save the recovery.

European stocks also gained, up 0.7 percent, and U.S. stock futures SPc1 rose around 1 percent after Hurricane Irene, downgraded to tropical storm status, spared the nation’s financial centre the worst.

London markets are closed on Monday for a holiday.

Bernanke gave no details of further action to boost the U.S. recovery but said the central bank’s policy panel would meet for two days next month instead of one to discuss additional monetary stimulus, offering some hope to investors of a move then. .

Analysts said a bad run of data before the Fed’s meeting may prove crucial.

“The change to a two-day meeting to ‘allow a fuller discussion’ is something that will likely keep market expectations elevated about the possibility of futher monetary policy stimulus,” Barclays Capital economist Michael Gapen said in a note to clients.

“Mr Bernanke said the Fed is in a data-dependent mode and there will be many discussions at the two-day FOMC in September.”


Both the dollar and euro gained around 1 percent against the Swiss franc, in which investors are now facing negative rates of return following the Swiss National Bank’s moves to flood the market with liquidity.

But the possibility of more monetary stimulus in the U.S. kept the dollar broadly under pressure, down 0.3 percent against a trade-weighted basket of currencies.

Against the yen, the greenback traded at 76.62 yen , recoiling from a recent high around 77.69.

“The fact that Bernanke did not talk about inflation risk has helped equity markets and put pressure on the dollar,” said Manuel Oliveri, currency strategist at UBS in Zurich.

“But there is not much more potential for the dollar to sell-off with markets now focusing on FOMC minutes and the U.S. employment report this week,” he said.

Debt troubles and political issues on both sides of the Atlantic make monetary policy the only viable short-to-medium-term policy response to slowing growth, said Viktor Shvets, regional strategist at Samsung Securities in Hong Kong.

But following through with another round of bond buying will be harder this time around, some analysts say, citing rising core inflation in the U.S. and a split regarding policy within the Fed as obstacles.

“He (Bernanke) has a much, much harder decision this time,” said Jim Walker, founder of Asianomics and former chief economist at CLSA Asia-Pacific Markets, in a Reuters television interview.

“What he’s got to do is convince the dissenting voices in the Fed and there are now three of them that economic growth is so bad that it is time to use even more extraordinary measures,” said Walker.

Japan’s Nikkei closed up 0.6 percent on subdued volumes. South Korea’s KOSPI , the Asian market considered to be the most geared to a global economic recovery, jumped more than 3 percent, then cooled to be up 2.8 percent.

MSCI Asia Pacific ex-Japan rose 2.1 percent. It is down 11 percent so far this month in its worst performance since October 2008, reflecting the scale of concern over global growth and its impact on the region’s energy and commodity stocks.

Brent crude LCOc1 traded just above $111 on Monday, dipping as oil refiners and terminals along the U.S. east coast weathered the worst of tropical storm Irene, easing fears of fuel supply disruptions.

NYMEX crude for October delivery CLc1 was up 0.2 percent.

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