Shares rise after Bernanke comments, oil lower

By Ryan Vlastelica

NEW YORK (Reuters) - Stock markets around the world rose on Wednesday after Federal Reserve Chairman Ben Bernanke signaled that the U.S. central bank's stimulus program would remain intact.

In testimony to Congress, Bernanke said the Fed's monetary policy was still providing significant benefits to the economy and that prematurely tightening it would carry substantial risks.

Shares were volatile, at one point jumping 1 percent before paring those gains as Bernanke said that economic improvement would lead the Fed to consider tapering its stimulus.

Analysts did not expect Bernanke to announce any substantial change to policy, but his comment on a potential tapering of the Fed's stimulus program caused stocks to come off their highs. The Fed's policy is widely credited with contributing to the S&P 500's rally of nearly 18 percent in 2013, a surge that has repeatedly taken it to all-time highs, including on Wednesday.

"He said exactly what Wall Street wants to hear. He's putting out there that there's no end in sight, which is exactly what we want and why stocks are bidding higher," said Todd Schoenberger, managing partner at LandColt Capital in New York.

"With things continuing for quarters to come, summer doldrums seem unlikely this year."

The Dow Jones industrial average was up 94.98 points, or 0.62 percent, at 15,482.56. The Standard & Poor's 500 Index was up 9.65 points, or 0.58 percent, at 1,678.81. The Nasdaq Composite Index was up 14.75 points, or 0.42 percent, at 3,516.87.

The MSCI all-country world equity index added 0.3 percent while shares in Europe rose 0.1 percent after earlier falling on weakness in luxury goods stocks.

The dollar index was up 0.4 percent against a basket of major currencies, near a three-year high of 84.37 struck last week. The euro fell 0.2 percent in a volatile session.

The dollar index is up nearly 5 percent this year as investors favor the greenback on signs of growing economic momentum and talk of an early end to the huge U.S. stimulus effort.

"The market's bias has been for dollar strength, but it is much more finely balanced now," said Elsa Lignos, senior currency strategist at RBC Capital Markets. "The reaction (to Bernanke) seems much more likely to be influenced by flows and technicals than the fundamental outlook," she said.

The dollar's moves were also seen limited by expectations that minutes from the Fed's last rate-setting meeting will underscore the wide divergence between policymakers on the future of the bank's $85 billion a month bond buying plan.

"Bernanke's comments could see the dollar ease somewhat. But the Fed minutes are likely to be hawkish, so we expect the dollar to regain ground, especially against the yen," said Marcus Hettinger, currency strategist at Credit Suisse.

The benchmark 10-year U.S. Treasury note fell 12/32, the yield at 1.9718 percent, erasing early gains after Bernanke raised the possibility of reducing the Fed's bond purchases this year if economic growth improves further.

JAPAN RISES

Japan's Nikkei climbed 1.6 percent to a 5-1/2 year high after the Bank of Japan, as widely expected, maintained an aggressively loose policy that will inject up to $1.4 trillion into the financial system.

That kept the yen weaker against the dollar, which gained 0.4 percent to 102.85 yen.

MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.3 percent.

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COMMODITIES MIXED

The debate over the Fed's next moves, and particularly the potential impact on the dollar and on growth, also dominated commodity markets.

Gold, traditionally seen as an inflation hedge and alternative to the dollar, was up 2.3 percent after Bernanke's comments, while copper rose to its highest level in two weeks.

But oil dropped 0.8 percent on data showing a surprise jump in U.S. gasoline stocks, suggesting that summer U.S. demand might not meet supply. U.S. crude futures fell 1.3 percent.

(Editing by Dan Grebler)