European Markets are called to open negative this morning.
Asian stocks dropped, dragging the regional benchmark index to its lowest level in two weeks, as Federal Reserve officials from Ben S. Bernanke to William Dudley fueled concern about the sustainability of the global recovery.
Nissan Motor Co., the Japanese carmaker that gets about 34 percent of its sales from North America, slipped 1.4 percent. Hyundai Motor Co., South Korea’s biggest automaker, slumped 4 percent in Seoul. Tokyo Electric Power Co., owner of the crippled Fukushima Dai-Ichi nuclear power station, slumped 6.5 percent, headed for a record low, after the Nikkei newspaper reported all of Japan’s nuclear reactors may be idled.
“Bernanke’s somber outlook combined with no hint of further quantitative easing being used as a policy response near-term have led to a negative tone in markets,” said Tim Schroeders, who helps manage about $1 billion in global equities at Pengana Capital Ltd. in Melbourne. “In a glass-half-empty environment, investors globally are adopting a much more cautious stance.”
U.S. stocks closed lower Tuesday after comments from Federal Reserve chairman Ben Bernanke dashed hopes that the central bank could provide additional economic stimulus.
The Dow Jones industrial average (INDU) fell 19 points, or 0.1%, to 12,070. The Dow had been up by 70 points earlier in the session. The S&P 500 (SPX) eased 1 point to settle at 1,285. The Nasdaq (COMP) lost 1 point to 2,701.
Speaking in Atlanta, Bernanke acknowledged that economic growth this year has been slower than expected. But he said growth should pick up in the second half of the year if gas prices “moderate” and supply disruptions stemming from the disaster in Japan fade.
Bernanke twice called the job market “far from normal” and conceded, “the economy is still producing at levels well below its potential.”
Despite the challenges facing the economy, Bernanke reiterated that the central bank’ $600 billion stimulus will run out later this month.
However, the chairman left the door open for more accommodative monetary policy, saying interest rates are likely to remain “exceptionally low” for an extended period, and did not dismiss the idea of further easing. Bernanke also said that should his inflation predictions be wrong, the Fed “would respond as necessary.”
“Overall, the economic recovery appears to be continuing at a moderate pace, albeit at a rate that is both uneven across sectors and frustratingly slow from the perspective of millions of unemployed and underemployed workers,” Bernanke said.
Events this week
Wednesday: The Federal Reserve will release its “Beige Book” at 2 p.m. ET on Wednesday. The book is a collection of economic anecdotal observations by the Fed’ 12 regional banks and is used by the central banks as part of their decision making regarding interest rates.
Thursday: The Labor Department will release its weekly initial jobless claims report at 8:30 a.m. ET, which investors said will likely be the closest-watched piece of economic data this week. Economists are looking for jobless claims to rise slightly to 423,000.
Also out on Thursday is the U.S. April trade balance figures, which are expected to show a $48.7 billion trade deficit, and April wholesale inventory figures. Economists expect wholesale inventories rose 0.9%, according to Briefing.com
Friday: Investors will get May’ import and export prices from the Commerce Department at 8:30 a.m. ET. Economists expect import prices rose 0.6% last month while export prices rose 1%.