European stocks fall after Bernanke remarks

Europe's main stock markets gave up early gains on Tuesday after US Federal Reserve Chairman Ben Bernanke gave a gloomy outlook on the US economy and on news of falling German investor confidence. In late afternoon trade, London's FTSE 100 benchmark index of leading shares slipped 0.50 percent to 5,633.65 points, Frankfurt's DAX 30 index was unchanged at 6,566.30 points and in Paris the CAC 40 won 0.12 percent to 3,193.58 points. Madrid lost most of an early rally and was up only 0.10 percent and Rome slumped 0.96 percent. In foreign exchange deals, the European single currency also reversed early gains, slipping to $1.2210 from $1.2271 in New York late Monday. In prepared testimony to Congress, Bernanke admitted that US economic data had been "disappointing" and that a future reduction in unemployment would likely prove "frustratingly slow." He also forecast slower growth for this year and next and painted a future replete with pitfalls both domestic and from Europe. "Given that growth is projected to be not much above the rate needed to absorb new entrants into the labor force, the reduction in the unemployment rate seems likely to be frustratingly slow," he said in his semi-annual testimony. German investor confidence also weighed on sentiment, falling for the third month in a row in July as the eurozone debt crisis hurt exports, a new survey showed on Tuesday. The ZEW think tank's economic expectations index declined by 2.7 points to minus 19.6 points, fanning concerns about the health of the eurozone's biggest economy. Markets were initially optimistic ahead of Bernanke's appearance before the Senate Banking Committee, hoping for clear signs that the US central bank would offer a liquidity boost to the lagging US economy. But Bernanke provided no such signals and US stocks erased earlier gains in late morning trade despite a spate of better-than-expected quarterly earnings from heavyweights such as Goldman Sachs, Johnson & Johnson and Coca-Cola. At around 1500 GMT, the Dow Jones Industrial Average was down 0.54 percent and the S&P 500-stock index lost 0.54 percent, while the tech-heavy Nasdaq shed 0.64 percent. In company news, shares in Rio Tinto sank 1.37 percent to 2,945.00 pence in London after the mining giant warned of significantly weakening global economic conditions. But it also posted record iron ore production and strong steelmaking coal output in the first half of 2012. Despite broader gains in Paris, Alcatel-Lucent stock tumbled 18 percent to 0.93 euros after warning that it no longer expects to post a stronger operating margin this year. The French telecommunications equipment maker also posted a provisional second-quarter adjusted operating loss of around 40 million euros, compared with a profit of 108 million euros in the same period a year earlier. Elsewhere, Asian shares gained ground on Tuesday, led by a sharp rise in Hong Kong, amid hopes of Chinese and US stimulus measures. Hong Kong closed up 1.75 percent, while the Shanghai Composite Index rose 0.62 percent on bargain-hunting after hitting a three-year low on Monday. Tokyo climbed 0.35 percent, while Sydney rose 0.87 percent.