Stocks in modest rally ahead of Bernanke comments

[March 01, 2011]  LONDON (AP) -- Stabilizing oil prices helped stocks around the world recover their poise Tuesday ahead of a key testimony from Federal Reserve Chairman Ben Bernanke to U.S. lawmakers.

With oil prices down from levels hit last week, investors are breathing a sigh of relief that energy costs may not rise as much as feared and that the impact on the global economic recovery may not be as damaging.

Reports that some Libyan ports had reopened to oil tankers and that Saudi Arabia was boosting crude exports softened tensions in oil prices. By late-morning London time, the benchmark New York oil price was up 32 cents at $97.29 a barrel, while the London equivalent was 22 cents higher at $112.02 a barrel. At the height of the markets' concerns over Libya last week, New York crude had risen over $102 a barrel and Brent had advanced towards $120.

However, events in the Middle East and North Africa will likely remain at the forefront of investors' thoughts, especially if Saudi Arabia faces a popular uprising like the ones that have already deposed the leaders of Tunisia and Egypt and threaten the regime of Moammar Gadhafi in Libya.

If Saudi Arabia, the world's biggest oil exporter, were to become embroiled in a similar situation, then many analysts think oil prices could rise to $200 a barrel, with damaging consequences for the economy. Not only would global growth be hit but inflation would spike up sharply, too.

"Considerable uncertainty remains as to the ultimate impact of the wave of popular protests and how to play this," said Jan Lambregts, head of financial markets research at Rabobank International.

Despite the geopolitical tensions, many of the world's biggest indexes are trading close to their highest levels since the summer of 2008.

"Equity markets continue to prove resilient to the oil supply shock which is being discounted as temporary," said Neil MacKinnon, global macro strategist at VTB Capital.

In Europe, the FTSE 100 index of leading British shares was up 0.2 percent at 6,005 while Germany's DAX rose 0.6 percent to 7,316. The CAC-40 in Paris was 0.3 percent higher at 4,123.

Wall Street was also poised for a modest advance following Monday's gains -- Dow futures were up 45 points, at 12,259 while the broader Standard & Poor's 500 futures rose 6 points to 1,332.10.

The U.S. open, though, could be affected by the February manufacturing survey from the Institute for Supply Management, which kicks off a busy economic data week culminating in Friday's closely-watched nonfarm payrolls data.

As important, at least in the currency markets, is what Bernanke tells a committee at the House of Representatives. Investors will be keeping a close watch to see if he sounds a more hawkish tone following relatively strong U.S. economic data and signs that inflationary pressures in the U.S. are beginning to swell amid the rise in oil prices.

Ahead of his testimony, the euro was more or less flat on the day at $1.3826 while the dollar rose 0.3 percent to 82.14 yen.

Earlier in Asia, Wall Street's recovery Monday boosted sentiment, with most key benchmarks closed higher.

Japan's Nikkei 225 stock average closed up 1.2 percent at 10,754.03 after fresh data showed the country's jobless rate held steady in January.

Hong Kong's Hang Seng ended up 0.3 percent to 23,396.42 even though heavyweight constituent HSBC Holdings dropped 4.7 percent after disappointing earnings the previous day.

Chinese shares edged higher in cautious trading, after the release of data showing manufacturing slowed last month, suggesting that efforts to rein in inflation may be taking effect. The benchmark Shanghai Composite Index rose 0.5 percent to 2,918.92 while the smaller Shenzhen Composite Index added 0.2 percent to 1,298.97.

[Associated Press; By PAN PYLAS]

Pamela Sampson in Bangkok contributed to this report.

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