By Sara Sjolin, MarketWatch
LONDON (MarketWatch) — European stock markets advanced on Wednesday, after U.S. Federal Reserve Chairman Ben Bernanke said the timetable for tapering asset purchases could change to reflect economic and financial developments.
The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP -2.90% rose 0.6% to close at 297.04.
Bernanke: Bond-buying plans not 'a preset course'
Paul Vigna and Justin Lahart discuss Federal Reserve Chairman Ben Bernanke's House testimony, and Spencer Ante looks at why smartphone upgrades are slowing. Photo: AP.
Among notable movers in the index, shares of BHP Billiton PLC /zigman2/quotes/208108397/composite BHP -2.23% /zigman2/quotes/201448516/delayed AU:BHP -1.75% picked up 2% after the mining giant said iron-ore production hit a record high in its past financial year.
European markets extended gains after Chairman Bernanke said the Fed’s proposed timetable to reduce its $85-billion-a-month asset purchases is not on a “preset” path.
In his remarks, prepared for delivery to the House Financial Services Committee, Bernanke reiterated earlier guidance that the economy will likely allow the Fed to pull back on the asset purchases later this year and end them altogether around midyear 2014.
But if the labor market becomes less favorable and financial conditions tighten, “the current pace of purchases could be maintained for longer,” he said.
At 10 a.m. Eastern, Bernanke kicked off his semiannual testimony, followed by a Q&A session with lawmakers, which was ongoing at the time of the European market close. Read: Four questions for Bernanke — that he may or may not answer — as he takes to Capitol Hill
“The overall sentiment is still fairly good. Markets have digested over the last couple of weeks that monetary conditions will get more stringent, but in turn for an economy that looks better,” said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets. “Less liquidity is in itself not good news, but it is positive if it only comes with a better economy.”
Since Bernanke in late May started talking about the prospect of tapering the central bank’s asset purchases, markets have been closely scrutinizing hints of when a reduction may set in.
“Bernanke has clearly indicated that everything will be data dependent, so people will be very closely watching data releases in coming months. We’re still in this reverse logic where a bad figure can be seen as a positive, because it means it could delay tapering and leave QE around for longer,” Gijsels said.
“Building starts today were negative, but still markets go up because markets think it means tapering will not happen immediately,” he added.
The U.S. Department of Commerce said on Wednesday that construction on new homes fell 9.9% in June to a seasonally adjusted annual rate of 836,000, reaching the lowest level since August 2012.
U.S. stocks traded mostly higher on Wall Street.