Market update: Dubbed ‘Bernanke’s balm’, the US Fed chairman’s speech has stabilised the markets

Comments by the Federal Reserve (Fed) chairman Ben Bernanke, at his semi-annual testimony to the Congress on Tuesday, reassured markets on continued central bank support as he strongly defended the Fed’s bond-buying stimulus, stating that the policy was contributing to economic recovery while inflation risks were subdued. Equities gained a further lift from a series of economic reports showing strength in the housing sector and consumer sentiment. The Dow Jones rose 0.8% while the S&P 500 was up 0.6%.

The strong positive signal from the US helped Asian shares advance overnight. Outside of Japan, Asian stocks rose, with Australian shares leading the gains. In Japan, a rising yen contributed to a drop of 1.3% in the Nikkei as exporters and financials came under pressure. After the sharp sell-off yesterday, as investors fretted about the deadlock in the Italian elections, stocks have recovered slightly this morning in Europe. The FTSE Eurofirst 300 and FTSE 100 were up 0.3% and 0.5% respectively at the time of writing.