European stocks up slightly ahead of Bernanke

[August 21, 2009]  LONDON (AP) -- European stock markets rose modestly Friday following a mixed performance in Asia as investors awaited key comments from U.S. Federal Reserve chairman Ben Bernanke.

The FTSE 100 index of leading British shares was up 20.69 points, or 0.4 percent, at 4,777.55, while Germany's DAX rose 31.46 points, or 0.6 percent, to 5,342.52. The CAC-40 in France was 6.52 points, or 0.2 percent, higher at 3,511.84.

Earlier in Asia, Japan's Nikkei 225 stock average fell 145.21 points, or 1.4 percent, to 10,238.20 and Hong Kong's Hang Seng dropped 129.84, or 0.6 percent, to 20,199.02. However, China's Shanghai Composite index rose for a second day -- gaining 1.7 percent to 2,960.77 -- after rattling investors worldwide when it tumbled earlier this week.

Whether the five-month rally in stocks will continue could well depend on what happens on Wall Street when trading traditionally picks up after the Labor Day holiday in early September.

"It still feels like its one step forward and the one step back as the market is still struggling to shake off the summer lull and find any clear direction," said Stuart Bennett, an analyst at Calyon Credit Agricole.

As has been the case in recent days, trading volumes remained very light -- and one effect of low volumes is that volatility tends to be higher, meaning any news developments could quickly get indexes moving. The most likely event on the calendar to shake up trading will be Bernanke's address at an annual Fed conference in Jackson Hole, Wyoming. In particular, investors will be interested to hear anything he may say on how the Fed plans to withdraw its monetary stimulus when the time comes.

"With the U.S. economy showing signs of sitting up and taking nourishment, observers wonder whether the Fed chairman will discuss any exit strategy from quantitative easing," said David Buik, markets analyst at BGC Partners.

Wall Street futures were subdued ahead of his comments. Dow futures were down 2 points at 9,318 while the broader Standard & Poor's 500 futures were unchanged at 1,004.70.

Wall Street posted modest gains Thursday as news of an improvement in regional manufacturing and an uptick in a gauge of leading economic indicators offset an unexpected rise in new claims for unemployment benefits.

Elsewhere in Asia, Australia's index retreated 2 percent after a government fund sold a big chunk of shares in the country's top telecommunications company Telstra. South Korea's Kospi rose 0.3 percent while India's Sensex was up 0.4 percent.

Oil prices remained supported above $72 a barrel. Benchmark crude for October delivery was down 20 cents to $72.71 a barrel in electronic trading on the New York Mercantile Exchange.

In currencies, the dollar fell 0.5 percent to 93.75 yen while the euro rose 0.3 percent to $1.4294.

[Associated Press; By PAN PYLAS]

AP Business Writer Stephen Wright in Bangkok contributed to this report.

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