World markets rally on Fed’s stimulus vow

PARIS—World stock markets rallied Friday after Federal Reserve Chairman Ben Bernanke signaled that the central bank would do more to stimulate the US economy.

European stocks had led the way higher in the early afternoon after a European Central Bank official said the bank was getting ready to give relief to European countries struggling with high borrowing costs by buying up their bonds.

In France, the CAC-40 rose 0.7 percent to 3,404, while Germany’s DAX was up 0.8 percent to 6,953 in afternoon trading. The FTSE index of British shares gained 0.1 percent to 5,727.

But the real boost came after Bernanke spoke at an economic forum in Jackson Hole, Wyoming. Expectations for new stimulus had been low after an economic survey earlier in the week sounded a fairly positive note.

But Bernanke said Friday that because US unemployment is so high, the Fed would do more to boost the economy, calling the recovery “far from satisfactory.”

He added that the central bank “should not rule out” new policies to improve the job market.

From a cautious open, Wall Street shot up. The Dow Jones industrial average rose 1 percent to 13,133, while the broader Standard & Poor’s index moved up 0.8 percent to 1,410.

“Bernanke left the door wide open to more QE (quantitative easing),” said Alan Ruskin, an analyst with Deutsche Bank. “He made strong arguments for its effectiveness, went through a list of potential criticisms that were largely dismissed or characterized as containable.”

Investors had spent the week waiting for Bernanke’s comments — and were not too hopeful. As a result, stocks were lackluster earlier in Asia.

Tokyo’s Nikkei 225, shed 1.6 percent to 8,839.91 points. China’s benchmark Shanghai Composite Index was off 0.3 percent at 2,047.52 and Hong Kong’s Hang Seng declined 0.4 percent to 19,482.57.

Seoul’s Kospi index shed 0.1 percent to 1,905.12 and Sydney’s ASX/S&P 200 ended unchanged at 4,316. South Korea reported July industrial production growth slowed more abruptly than expected, falling to 0.3 percent over a year earlier from June’s 1.4 percent