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While you were sleeping: Fed fuels advance

While you were sleeping: Fed fuels advance

December 7 (BusinessDesk) - It seems whenever there is renewed doubt about the outlook for the world’s biggest economy, Ben Bernanke is close at hand.

Bernanke’s comments on CBS’ ’60 Minutes’ show that aired on Sunday night in the U.S. on the weekend weren’t new. He simply reiterated for the umpteenth time that the Fed would do whatever was necessary to bolster the economy.

While Bernanke seems closer than ever to sounding like a broken record, it was music to the ears of investors, who remain nervous and edgy and prone to run at the drop of a pin.

"The U.S. showed you need to take extremely strong actions to overcome the threat of a broad financial crisis," Rick Meckler, president of investment firm LibertyView Capital Management in New York, told Reuters.

In fact, the Fed once again is showing its European peers what they need to do to retake control of their own financial backyard.

European investors were waiting on a meeting of finance ministers in Brussels on whether the euro zone would bolster its emergency fund and make it effective immediately. Unlike the Fed which has opened the door - perhaps even take the door off its hinges, the European Central Bank has been, in a comparative sense, a reluctant market participant.

The euro slipped 0.95% to US$1.3286, its first decline in four sessions.

Hungary’s forint sank 1.1% against the euro after Moody’s cut its debt rating to the lowest investment grade and suggest it might soon be classified as junk.

Part of the reason for U.S. stocks fading after opening higher was a pull back in the price of oil by early afternoon trading in New York.

U.S. crude oil futures slipped 30 cents, or 0.34%, to US$88.89 per barrel, after trading as high as US$89.76, the highest since October 2008, as a cold spell in Europe and in parts of the United States spurred greater heating demand.

Spot gold prices rose as high as US$1,420.31 an ounce before easing to US$1,413.40 an ounce later in the day. It touched a record US$1,424.10 early in November.

Yields on 10-year Treasury notes lost four basis points to 2.97% at 1.04pm in New York, halting a three-day rise.

The Dollar Index rose 0.3% to 79.623 and the euro slid against 13 of 16 major counterparts.

But as with most market moves, investors need to be nimble.

In a note to clients today, Bank of America Corp. recommended an asset allocation that is “significantly overweight” stocks and commodities, while “underweight” bonds and cash, saying the bull market in equities that began in March 2009 isn’t over yet, according to Bloomberg News.


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