NEW YORK (REUTERS) - World stock indexes rose while the dollar weakened on Thursday after Federal Reserve chairman Ben Bernanke signalled the United States (US) central bank may not be as close to slowing stimulus as investors had begun to expect.
Copper and gold prices also gained on the view that continuing stimulus from the Fed and from Europe's and Japan's central banks would support global economic growth. Copper prices hit their highest level in nearly a month.
Mr Bernanke said late on Wednesday the overall message from the central bank was that "a highly accommodative policy is needed for the foreseeable future".
Despite minutes from the Fed's June meeting stating that half of its policymakers think the US$85-billion (S$108 billion) monthly stimulus programme should be wound down by the end of the year, Mr Bernanke's message was enough to shift the market's view.
"His statement that they will be highly accommodative for the foreseeable future is pretty clear and the market loved it," said Mr Doug Cote, chief market strategist at ING US Investment Management in New York. "That statement was very clear and that is what the market is reacting to because he is in charge."
The Fed's stimulus efforts have kept interest rates near zero and helped lift US stocks to record highs this year.
Investors worry the US recovery would be hurt if the Fed removes its support too soon.
On Wall Street, the S&P 500 rose more than 1 per cent, putting it within range of an all-time closing high.
The Dow Jones industrial average was up 126.25 points, or 0.83 per cent, at 15,417.91. The Standard & Poor's 500 Index was up 16.78 points, or 1.02 per cent, at 1,669.40.
The Nasdaq Composite Index was up 46.62 points, or 1.32 per cent, at 3,567.38.
MSCI's world index rose 1.3 per cent, while the pan-European FTSEurofirst 300 closed up 0.6 per cent.
The dollar index, which tracks the greenback against a basket of six currencies, fell to 82.418, its lowest since June 25 and down 2.8 per cent from a three-year high of 84.753 touched on Tuesday. It last traded down 1.3 per cent at 82.978.
"The dramatic drop in the dollar highlights how one-sided (dollar bullish) the market had become and how quickly traders raced to close out long dollar positions," said Ms Camilla Sutton, chief foreign exchange strategist at Scotiabank in Toronto.
Large swings in currencies, stocks and bonds over recent weeks have underscored how difficult it will be for the Fed and other central banks to change their stimulus policies without causing a lot of disruption to markets.
Portuguese, Spanish and Italian bonds and Lisbon's stock market bucked the wider global move higher as tensions continued to bubble on the euro zone's debt-strained periphery.
BOND PRICES HIGHER
US government debt prices rose on Thursday after the Treasury sold 30-year bonds.
"The auction was well received," said Mr Ian Lyngen, senior government bond strategist at CRT Capital Group LLC in Stamford, Connecticut.
Benchmark 10-year Treasury notes last traded 17/32 higher with a yield of 2.6079 per cent.
Three-month copper on the London Metal Exchange rose to its highest since June 18 at US$7,049.25 a tonne in intraday trade. Spot gold climbed as much as 2.7 per cent to US$1,298.36, its highest since June 24. It was up 1.7 per cent to US$1,285.16 an ounce.
Oil futures were down sharply, however.
Brent crude oil futures fell 82 US cents to US$107.69, after hitting US$108.93, its loftiest since April 3. A monthly IEA oil report damped bullish sentiment.
US crude dipped from a 15-month high as investors took profits after three weeks of sharp gains. The price was down US$1.70 at US$104.82 a barrel after peaking at US$107.45 earlier.