LONDON (AP) - World stocks mostly rose Thursday after the incoming Federal Reserve chief suggested the U.S. central bank won't cut its economic stimulus until March or later. Gains in Europe, however, were capped by news the recovery there nearly ground to a halt. Janet Yellen, who is slated to replace Ben Bernanke as Fed chairman at the end of January, told a Senate banking committee Thursday that the U.S. economy still needs the Fed's support.
While there was progress in the recovery, Yellen said the labor market and economy are "performing far short of their potential." She said unemployment was still too high and inflation still below target. She reiterated the world's No. 1 economy must show continued signs of improvement before the Fed starts tapering off its $85 billion of monthly bond purchases. "That statement alone has changed the landscape of trade today," said Evan Lucas, market strategist with IG in Melbourne, Australia. It suggests the bond buying effort, which has kept commercial interest rates low to encourage borrowing and investment, will be kept in place at current levels until the end of the first quarter of next year, he said.
Analysts had previously thought the Fed would start reducing its stimulus in December or January. Major European benchmarks rose despite figures showing the eurozone economy grew a mere 0.1 percent in the third quarter, just three months after emerging from recession. The figure showed weakness in core economies, such as France and Germany, and only mild improvements in crisis-hit countries like Spain.
Germany's DAX rose 1.1 percent to close at 9,149.66 while France's CAC-40 rose 1 percent to 4,283.91. Britain's FTSE 100 gained 0.5 percent to 6,666.13. U.S. markets rose, pushing major indexes to record highs after Yellen's comments. The Dow was up 0.2 percent at 15,856.52.20 while the S&P 500 gained 0.3 percent to 1,788. In Asia, Tokyo's Nikkei 225 surged 2.1 percent to 14,876.41, also helped by renewed weakness in the yen as it approached 100 to the dollar.
China's Shanghai Composite rose 0.6 percent to 2,100.51 and Hong Kong's Hang Seng gained 0.8 percent to 22,649.15. Benchmarks in Australia, Taiwan, South Korea and Singapore also rose. In energy markets, benchmark crude for December delivery rose 42 cents to $94.30 in electronic trading on the New York Mercantile Exchange. The contract gained 84 cents on Wednesday. The euro dropped 0.1 percent $1.3479, while the dollar rose 0.7 percent to 99.89 yen.