CORRECTED-GLOBAL MARKETS-U.S. dollar falls, bonds rise on Fed minutes, Bernanke comments
Bernanke comments@ (Corrects headline to match first paragraph)
* Bernanke says Fed still to pursue accommodative policy
* Fed minutes show policymakers divided on need for slowing bond purchases
* U.S. oil surges, gains on Brent as crude inventory shrinks
NEW YORK, July 10 (Reuters) - The U.S. dollar fell and Treasury debt prices rose on Wednesday after the minutes of the Federal Reserve's meeting in June showed policymakers wanted lower unemployment before slowing bond purchases. Comments by Fed Chairman Ben Bernanke late in the day spurred a further fall in the dollar and gains in bond futures, while U.S. stock futures also rose after stocks had ended little changed. Bernanke said the Fed would continue to pursue a highly accommodative monetary policy for now as inflation remains low and the employment rate may be overstating the health of the labor market. "Bernanke emphasized some of the risks to the U.S. economy, leading the U.S. dollar lower, with dollar/yen a good example," said Sebastien Galy, foreign exchange strategist at Societe Generale in New York. The dollar fell to the day's lows against both the euro and yen after Bernanke's comments, with the euro trading around $1.2986 and the dollar at 99.65 yen. The dollar index, which tracks the greenback against a basket of six currencies, was last down 1.4 percent at 83.435, retreating from a three-year high at 84.753 touched on Tuesday. The minutes of the Fed meeting showed that even as consensus built within the Fed in June about the likely need to begin pulling back on economic stimulus measures soon, many officials wanted more reassurance the employment recovery was on solid ground before a policy retreat. "The minutes were not as hawkish as expected," said Joseph Trevisani, chief market strategist at WorldWideMarkets, in Woodcliff Lake, New Jersey. The U.S. benchmark 10-year Treasury note was up 3/32 in price, its yield easing to 2.626 percent, in late trade after Bernanke's comments. "Even though the minutes were more dovish than expected, their impact was somewhat discounted by the continued strength in the labor market that was seen after the Fed's last meeting," said Jake Lowery, Treasury trader at ING Investment Management in Atlanta, Georgia. Since the June Federal Open Market Committee meeting and an upbeat June payrolls report last Friday, Treasury yields have climbed and were at 23-month highs on Monday before they retreated on Wednesday.
U.S. STOCKS END STEADY, FUTURES RISE LATE The Dow Jones industrial average slipped and the S&P 500 stock index ended little changed, interrupting a four-day rally, with investors trying to gauge when the Federal Reserve may scale back on its economic stimulus. The Dow Jones industrial average dipped 8.68 points, or 0.06 percent, to end at 15,291.66. The Standard & Poor's 500 Index inched up just 0.30 of a point, or 0.02 percent, to finish at 1,652.62. The S&P 500 has risen more than 2.0 percent over the past five sessions, pushing the benchmark index to near its all-time closing high of 1,669.16. Investors were more encouraged by the comments from Bernanke after the market close suggesting that the Fed would "push back" if financial conditions tightened so much as to threaten the economy's progress. Bernanke's comments sent U.S. stock index futures higher after the close of regular trade. S&P 500 stock futures rose about 0.6 percent after Bernanke spoke, while Nasdaq futures rose more than 1.0 percent. "That is calming market fears," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York, referring to Bernanke's comments on the labor market. Bernanke spooked investors last month when he said the economy's expansion was strong enough for the central bank to start slowing the pace of its bond purchases later this year.
WEAK CHINA TRADE DATA Earlier in the day weak data from China and a credit ratings downgrade of Italy curbed investors' enthusiasm for equities on major world bourses. After a five-day run of gains for world share markets and the dollar's surge to a three-year high, investors were booking profits and squaring positions. MSCI's world equity index was up only 0.34 percent, helped by a late rally in Chinese shares sparked by talk of a policy easing to offset slowing economic growth.
The broad FTSEurofirst 300 index of leading regional European companies ended up just 0.09 percent at 1,190.02 after data showing China's exports fell for the first time in 17 months was followed by soft manufacturing data from France, the Netherlands and Greece. China warned of a "grim" outlook for trade after data showed exports fell 3.1 percent in June, confounding forecasts for a 4 percent rise. However, the data fueled talk that China's central bank may ease policy in an effort to boost growth.
U.S. crude oil prices surged nearly $3 a barrel to their highest in 16 months, narrowing the discount to Brent crude to less than $2 after U.S. data showed the biggest two-week decline in crude stocks on record. Oil inventories plunged about 10 million barrels for a second week in a row, highlighting the unexpectedly rapid tightening of the market after three years of pent-up supply due to a dramatic resurgence in domestic production. U.S. crude rose $2.99 to settle at $106.52 a barrel, while Brent gained 70 cents to settle at $108.51.
(Additional reporting by Marc Jones in London; Editing by Bernadette Baum, James Dalgleish, G Crosse and Dan Grebler)