Bernanke helps lift stock markets

Bernanke comments help lift stock markets; Europe pares losses as US trades higher

AP - An investor reacts as he looks at the stock price monitor at a private securities company Tuesday, Jan. ...

LONDON (AP) -- World stocks ended mixed on Tuesday after U.S. Federal Reserve chairman Ben Bernanke gave a guarded welcome to the huge stimulus package being planned by the incoming Obama administration.

European stocks ended with losses but above their lows for the day, while broad U.S. stock indexes posted small gains, as did most Latin American markets. Earlier, Asian stocks fell.

In Europe, the FTSE 100 index of leading British shares closed down 27.04 points, or 0.6 percent, at 4,399.15, while Germany's DAX fell 82.68 points, or 1.8 percent, to 4,636.94. France's CAC-40 was 48.23 points, or 1.5 percent, lower at 3,197.89.

Europe's indexes had fallen by more than 2 percent earlier in the day.

The Dow Jones industrial average ended down 25.41 points, or 0.30 percent, to 8,448.56 but broader indexes advanced. The Standard & Poor's 500 index rose 1.53, or 0.18 percent, to 871.79, while the Nasdaq composite index rose 7.67, or 0.50 percent, to 1,546.46.

Investors were buoyed somewhat by Bernanke's comments to students in London that the stimulus package being crafted by President-elect Barack Obama and Congress could provide a "significant boost" to the ailing U.S. economy.

Bernanke also warned, however, that "more capital injections and guarantees may become necessary" to stabilize financial markets and spur more lending. Obama is pushing for an economic stimulus that includes big tax cuts and has an estimated price tag of about $800 billion.

Questions about corporate earnings are likely to dominate trading in the coming weeks. Investors are watching closely for companies' expectations for business conditions in 2009. Computer chip maker Intel Corp. and drug company Genentech Inc. are among those reporting results this week.

"Earnings will now decide market sentiment," said David Jones, an equities strategist at IG Index in London.

There were early signs in 2009 that the markets had put the woes of the previous year behind them but that came to an abrupt halt last week amid grim economic news from the U.S., most notably the rise in the unemployment rate to a 16-year high of 7.2 percent.

Most Latin American markets managed small gains. Brazil's Ibovespa index finished up 0.36 percent at 39,544, Chile's IPSA tacked on 0.1 percent to 2,470 and Argentina's Merval added 0.3 percent to 1,132. Mexico's IPC index, however, slipped 0.5 percent to 21,047.

Earlier, most leading Asian markets retreated, with Japan's Nikkei 225 stock average tumbling 422.89 points, or 4.8 percent, to 8,413.91, as it caught up with Asia's losses on Monday after being closed for a holiday.

Hong Kong's Hang Seng index slid 2.2 percent to 13,668.05, Australia's index slipped 0.8 percent and Shanghai's market traded 2 percent lower amid news that China's trade slump worsened in December as exports fell at their fastest rate in a decade. South Korea bucked the trend with the Kospi up 1 percent to 1,167.71.

Light, sweet crude for February delivery rose 19 cents to settle at $37.78 a barrel on the New York Mercantile Exchange after falling to $36.10 earlier, a new low for the year.

The dollar rose after the government said the U.S. trade deficit fell to its lowest level in five years. The euro dropped to $1.3177 in late New York trading Tuesday from $1.3395 late Monday. The British pound dropped to $1.4493 in late trading from $1.4843, and the dollar inched up to 89.13 Japanese yen from 89.07 yen.

AP Business Writers Sara Lepro in New York and Stephen Wright in Bangkok contributed to this report.