Wall Street moves higher after better than expected US GDP

Wall Street has opened higher after the better than expected US GDP revision, but all eyes will be on Federal Reserve chairman Ben Bernanke's speech due to start shortly.

Economists are keen to hear the Fed boss's latest view on the US economy, given the recent spate of downbeat housing and manufacturing data, as well as any signs about further quantative easing. However ahead of his comments, today's US growth number was not as bad as feared, showing a rise of 1.6% in the second quarter, down from the initial 2.4% figure but better than the 1.4% most people had expected.

So the Dow Jones Industrial Average is around 35 points higher in early trading, back above the 10,000 level, while the FTSE 100 is up 9.30 points at 5165.14. CEBR economist Owen James said, with reference to the US economy and Bernanke's speech:

The world's central bankers meet today at Jackson Hole in Wyoming. Bernanke will undoubtedly compare notes with Jean-Claude Trichet, president of the European Central Bank, and Charlie Bean, deputy governor of the Bank of England. The three will share similar views over weakening underlying growth in the global economy. Bernanke, however, is the one under greatest pressure to calm fears of a "double dip" recession and possible deflation.
With a truck load of miserable US economic reports recently, there are growing cries for the Fed to take further action to boost the recovery. The consensus mood among the central bankers will be one of genuine concern at the weakening performance of the world's largest economy. Today's data will only add to that. As such, Bernanke will be looking closely at further monetary stimulus (or quantitative easing - QE), especially in the context of the Bush tax cuts coming to an end shortly. So QE2 could set sail before the end of the year and any plans to raise interest rates will be on hold until mid 2011.

Michael Cloherty, head of US rates strategy at RBC Capital Markets, said:

From a market perspective, it will be very much about what policy responses are put forth. If he doesn't deliver, while rates would likely rise on an initial disappointment trade, investors will need to closely watch the stock market reaction – weak equities could generate a whipsaw response in the Treasury market.