NEW YORK, June 7 (Reuters) – Global stocks rose on Thursdayafter China unexpectedly cut interest rates to shore up growth,but optimism was tempered by Federal Reserve Chairman BenBernanke, who disappointed investors looking for furtherstimulus for the US economy.
Gold tumbled nearly 2 percent as investors unwound bullishbets built on expectations of Fed easing.
Bullion was hitparticularly hard compared with equities and other commodities,as it has been heavily used by institutional investors to hedgeagainst economic uncertainties.
Stocks fell after Fed Chairman Bernanke remained coy on the possibility of more central bank stimulus for the economy.
He said the central bank was closely monitoring “significantrisks” to the US recovery from Europe’s debt and bankingcrisis, but struck a decidedly different tone from the centralbank’s No.
Ben Shalom Bernanke is an American economist and currently chairman of the Federal Reserve, the central bank of the United States.
“Bernanke threw traders a curve ball. After his vice chairmade it seem like (quantitative easing) was a foregoneconclusion, he really messed people up. We tried to shake thatoff but there was a lack of follow through and we lostmomentum,” said Phil Flynn, senior market analyst with PFG Bestin Chicago.
The MSCI world equity index rose 0.7 percentto 301.16 points, after hitting its highest level in more than aweek.
Hopes that central banks in the United States and Europewould act to bolster the global economy had driven world sharesup more than 3 percent this week after steep losses in May.
The surprising move raised investors’confidence on the economic prospect and the expectations that other central banks will follow China’s lead to launch easing monetary policies.
The Dow Jones industrial average ended up 46.17 points, or 0.37 percent, at 12,460.96.
The Nasdaq Composite Index wasdown 13.70 points, or 0.48 percent, at 2,831.02.
The S&P 500 index lost 0.14, or 0.01 percent to 1,314.99 and the Nasdaq Composite Index retreated 12.70, or 0.48 percent to 2,831.02.
The FTSEurofirst 300 closed up 1.1 percent at 984.62,its highest close since May 29.
It briefly extended losses after Fitch slashed Spain’scredit rating by three notches and signaled it could makefurther cuts as the cost of restructuring the country’s troubledbanking system spiraled and Greece’s crisis deepened.
CHINA’S SURPRISE CUTChina delivered twin surprises on interest rates onT hursday, cutting borrowing costs to combat faltering growthwhile giving banks additional flexibility to set competitivelending and deposit rates in a step along the path ofliberalization.
China’s first rate cut since the global financial crisisunderlined heightened concern among policymakers worldwide thatthe euro area’s deepening debt problems are threatening economicgrowth.
The news had earlier boosted oil prices on expectations thatfaster growth in the world’s largest energy consumer could boostdemand.
But gains faded after Bernanke’s comments dimmed hopesof more US stimulus.
Brent crude slipped 71 cents to settle at $99.93 abarrel, after rising as high as $102.45 a barrel.
Spot gold was down 1.7 percent at $1,589.30 an ounce,off a high of $1,628.80 an ounce.
The benchmark 10 year US Treasury note was up 4/32, the yield at 1.6473 percent.
The better tone in the markets allowed Spain to sell 2.1billion euros of fresh debt o n T hursday, just days after thecountry’s treasury minister warned that access to the creditmarkets was under threat.
Yields initially fell 10 basis points on Spain’s existing10 year bonds after the auction, to 6.2 percent.
China cutting rates is seemingly a positive and Bernanke wasneutral to slightly negative, but you have to put it all in thecontext of the negative we are still dealing, which is Europe,”said Tom Porcelli, chief US economist, RBC Capital Markets inNew York.
Emma Moore is a business journalist based in Melbourne, Australia. Emma has a passion for financial markets and breaking news stories and loves writing about business news, stock market, and economic opinions that matters most to its audience. Emma spends a lot of time discovering and researching latest financial markets and industry news stories in order to make sure the latest and greatest stories are brought to you first on BigBoardNews.com.
