World stocks fall after Fed chief coy on stimulus
World stock markets fell, deflated after U.S. Federal Reserve Chairman Ben Bernanke gave no hint of immediate action to jump-start growth in the world's No. 1 economy. Markets were also bracing for the possibility of glum economic data from China over the weekend.
Bernanke avoided sending any signals in an appearance before members of the U.S. Congress about what the Fed might do in response to a slowdown in hiring. The 69,000 jobs created in May was the fewest in a year.
Francis Lun, managing director of Lyncean Holdings in Hong Kong, said markets were "slightly disappointed" that Bernanke had not said the Fed would extend its Treasury bond-buying program, known as quantitative easing. The program injects money into the financial system, lowering interest rates to spur lending and growth.
An effort by China on Thursday to reverse a sharp economic downturn with a surprise cut to a benchmark lending rate failed to rejuvenate markets because it may have been too little, Lun said.
"The economy is slowing much faster than people expected," he said.
In early European trading, Britain's FTSE 100 dropped 1 percent to 5,394.44. Germany's DAX lost 1.3 percent to 6,063.96 and France's CAC-40 fell 1.6 percent to 3,023.37.
U.S. futures augured a lower open on Wall Street. Dow Jones industrial futures fell 0.7 percent to 12,316 and S&P 500 futures lost 0.8 percent at 1,299.60.
The losses echoed those in Asia. Japan's Nikkei 225 index fell 2.1 percent to close at 8,459.26. South Korea's Kospi dropped 0.7 percent to 1,835.64.
Australia's S&P/ASX 200 lost 1.1 percent to 4,063.70. Hong Kong's Hang Seng shed 0.9 percent to 18,502.34. Benchmarks in mainland China, Singapore, Taiwan, Indonesia, the Philippines and New Zealand also fell.
Aside from an interest rate cut, China's central bank also said Thursday that commercial banks would be allowed to pay higher deposit rates than those dictated by the government. That could help to shift money to households from China's hugely profitable government-owned banks.
Analysts said the moves suggest May trade and economic data due to be released in the next few days could be unexpectedly weak, spurring authorities to take more urgent action.
China has rolled out a series of measures to stimulate the economy after growth fell to a nearly three-year low of 8.1 percent in the first quarter and April factory output grew at its slowest rate since the 2008 crisis. Private sector analysts expect this quarter's growth to fall further.
Andrew Sullivan of Piper Jaffray Asia in Hong Kong said in a commentary that investor concerns remained focused on Europe - where a lingering financial crisis has now infected Spain and its banks.
Global investors are worried that the recession-hit country can't come up with the money needed to save its banks without bankrupting the government. Expectations are rising that Spain's leaders will have to seek an international bailout for banks swaying under the weight of bad real estate loans.
Spain's borrowing costs have soared close to the level that forced the governments of Greece, Portugal and Ireland to seek financial rescues. As much as 100 billion euros ($126 billion) may be needed to bolster Spanish banks, the credit rating agency Fitch said Thursday.
Benchmark oil for July delivery was down $2.59 to $82.24 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 20 cents to finish at $84.82 per barrel in New York.
In currencies, the euro fell to $1.2462 from $1.2601 late Thursday in New York. The dollar fell to 79.18 yen from 79.68 yen.