Bernanke's Testimony Reassures Markets, Lifts ETFs | ETF Trends

Federal Reserve Chairman Ben Bernanke addressed Congress this morning to give his opinion on the U.S. recovery, the European debt crisis and more. His words struck a reassuring tone in the markets and sent exchange traded funds (ETFs) higher.

Overall, Bernanke’s comments were positive ones. Among the things he said:

  • The crisis in Europe will only have a “modest” impact on the U.S. economic recovery – so long as Wall Street gains some stability.
  • The rate of expansion in the U.S. economy isn’t going to be enough to bring relief to the 9.7% of Americans who remain among the ranks of the unemployment. It will be a “slow reduction,” he said.
  • In general, the economy will continue to move forward, even as stimulus measures wind down. Consumers and businesses are spending again, although it’s subdued.
  • He pledged to hold rates at record lows to ensure the recovery continues to move forward.

Asian markets were up overnight, with the Shanghai composite surging 2.78%. Part of the reason for the increase could be the exports report coming from China that saw a 50% increase in year-over-year exports. Expectations for May were set at 32%, well below the actual numbers. Despite this good news for Chinese manufacturing, it comes with continued and intensifying labor protests. [China ETF: Foreign Investors Look at Long-Term Prospects.]

  • iShares FTSE/Xinhua China 25 Index (NYSEArca: FXI)

The dip in home sales that many wondered would occur appears to be happening – applications sank to a fifth consecutive week to a 13-year low. It’s being attributed to the pullback of a homebuyer tax credit that expired on April 13. Demand for loans to buy homes fell 5.7% in the week ended June 4, and that’s with a Memorial Day slump factored in. [Commercial Real Estate ETFs Look for a Bottom.]

  • SPDR S&P Homebuilders (NYSEArca: XHB)

Despite a rebound in European markets Wednesday, international debt markets have closed off funding for small Spanish banks. Continued concerns regarding elevated risks associated with many of the country’s cajas and the Spanish economy as a whole for the interbank market to feel comfortable lending in the struggling European country. [Europe ETFs in the Bargain Basement.]

  • iShares MSCI Spain (NYSEArca: EWP)

Tomorrow, the Labor Department is expected to report a widening trade deficit, which is very worrying for economists. A rising deficit coupled with weakness in regional banks that still have bad loans on their books could threaten to keep unemployment high and constrain the economic recovery. One factor is the Chinese yuan, which has been undervalued by 40%. It keeps Americans buying Chinese goods, but not exporting anything to make up the difference. [What Currency ETFs Can Say About An Economy.]

  • WisdomTree Dreyfus Chinese Yuan (NYSEArca: CYB)

Aaron Hurst contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.