MercoPress. South Atlantic News Agency

Markets react to Bernanke’s speech, but also warnings of over expectations

ECB Trichet, “premature talk of a full recovery”

World stock markets reacted positively after US central bank chief Ben Bernanke said the world's biggest economy was nearing the start of a recovery.
“The prospects for a return to growth in the near term appear good,” Mr Bernanke told a conference in Wyoming.

On Wall Street, the Dow Jones index rose more than 1%, while European markets were also sent higher.

But the Fed boss said unemployment, which is expected to top 10% in the US, would fall “only gradually”.

However, European Central Bank president Jean-Claude Trichet expressed concern at what he saw as premature talk of a full recovery.

“I am a little bit uneasy when I see that, because we have some green shoots here and there, we are already saying, 'well, after all, we are close to back to normal',” he said, speaking later at the conference.

Central bankers were speaking as data showed sales of existing US homes rose by more than 7% in July. That was the largest monthly increase in the 10 years that the National Association of Realtors has been keeping records.

But Mr Bernanke warned that the road to recovery would be a long one.

“The economic recovery is likely to be relatively slow at first, with unemployment declining only gradually from high levels,” he said.

The International Monetary Fund has predicted that the US economy will expand by 0.75% next year, after earlier predicting no growth. The Fed chief was also upbeat on the prospects for the world economy.

“After contracting sharply over the past year, economic activity appears to be levelling out, both in the United States and abroad,” he said.

The IMF has previously said that the global economy was “starting to pull out of recession”.

The Dow Jones finished 156 points higher at 9,506. The Nasdaq and the S&P 500 also rose by more than 1%.

London's FTSE 100 climbed 2% to close at 4,851, while Germany's Dax index rose 2.8% and France's Cac 40 gained 3.1%.

“Bernanke was a little bit more bullish than most people were expecting,” said Jacob Oubina, currency strategist at Forex.com.

“He's saying that the global economy is starting to emerge from the recession and that the fears of a financial collapse have receded substantially.

”I think the market is just taking those headlines as extreme positives for the outlook.”