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MARKETS DRIFT AS INVESTORS PAUSE FOR BREATH

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MARKETS DRIFT AS INVESTORS PAUSE FOR BREATH AP
LONDON (AP) -- Financial markets were fairly lackluster Tuesday as investors paused for breath ahead of key testimony from Federal Reserve chairman Ben Bernanke.

Bernanke's comments on Wednesday to lawmakers in Congress could well set the tone in markets for the rest of the summer. In particular, investors will be looking for any further guidance on when the Fed will start to reduce its monetary stimulus.

The Fed is currently spending $85 billion buying financial assets in the hope of keeping long-term borrowing rates low and stimulating the U.S. economy. The new money created by the various monetary stimulus that have been enacted in recent years have been one of the key drivers of markets.

Disappointing retail sales figures on Monday reinforced expectations that the so-called "tapering" may take place later in the year than previously thought.

"It seems that the indifferent economic data seen yesterday is fuelling the perception that the Fed won't be inclined to look at tapering asset purchases any time soon, given Bernanke's comments last week," said Michael Hewson, senior market analyst at CMC Markets. "This could be a mistake on the markets part, especially if the Fed Chairman strikes a different tone."

Caution appeared to be the watchword in Tuesday trading in Europe. The FTSE 100 index of leading British shares was up 0.2 percent at 6,598 while Germany's DAX fell 0.3 percent at 8,213. The CAC-40 in France was 0.4 percent lower at 3,862.

Wall Street was headed for a steady opening with both Dow futures and the broader S&P 500 futures up 0.1 percent. On Monday, both closed at record highs while the S&P posted its eighth straight day of gains, its longest such streak since January.

Later, the focus of attention will be on monthly industrial production figures as well as the latest batch of corporate earnings statements. So far, the second quarter reporting season has been fairly strong, providing markets with another boost. Goldman Sachs, Johnson and Johnson and Coca-Cola are also due to report later while Yahoo unveils its numbers after the close.

"Corporate earnings season is going to play an much bigger part in driving market sentiment in the coming weeks, than it has over the last couple of years," said Craig Erlam, market analyst at Alpari. "With investors no longer able to rely on the Fed to drive equity markets higher, they have to make do with focusing more on the fundamentals, and nothing gives us a better overview of these than company earnings reports and their expectations for the coming quarters."

Earlier in Asia, South Korea's Kospi fell 0.5 percent to 1,866.36 while Hong Kong's Hang Seng was flat at 21,312.38. China's Shanghai Composite Index rose 0.3 percent to 2,065.72.

Elsewhere, trading was fairly flat. In currency markets, the euro was up 0.2 percent at $1.3080 while the dollar fell 0.4 percent to 99.61 yen.

Oil prices were steady too, with the benchmark New York rate up 15 cents at $106.47 a barrel.

© 2013 THE ASSOCIATED PRESS. ALL RIGHTS RESERVED. THIS MATERIAL MAY NOT BE PUBLISHED, BROADCAST, REWRITTEN OR REDISTRIBUTED. Learn more about our PRIVACY POLICY and TERMS OF USE.
Last modified on Tuesday, 16 July 2013 06:31

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