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Bernanke's Fed action, Europe crisis hold key to aiding rally

Wall Street hopes for more Fed action and clear signs European leaders will follow through on their new urgency to tackle the euro zone debt crisis if US stocks are to build on their best week since early July.



New York: Wall Street hopes for more Fed action and clear signs European leaders will follow through on their new urgency to tackle the euro zone debt crisis if US stocks are to build on their best week since early July.

Investors expect the Federal Reserve to take steps to pull down long-term interest rates when policymakers meet on Tuesday and Wednesday to help revive the persistently weak US economy.

Fed Chairman Ben Bernanke, speaking in Jackson Hole, Wyoming, on Aug. 26, said the Fed's Open Market Committee would meet for two days in September instead of the scheduled one day to discuss ways to boost the recovery.

But even with expectations of more intervention to boost the economy, investors will keep a close eye on developments in Europe.

Any lack of progress or backsliding on efforts to get the currency bloc's fiscal house in order will renew worries the crisis could seriously damage the world financial system and major economies.

"The Fed is really going to dominate next week," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

"But the market has been trying to work its way higher here, trying to feel if maybe the European thing won't cascade out of control."

US Treasury Secretary Timothy Geithner, at a meeting of euro zone finance ministers in Poland on Friday, urged them to leverage their bailout fund to better tackle the debt crisis, but there was no agreement on what steps to take.

Bureau Report

From Zee News

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