* China interest rate cut boosts risk assets
* Bernanke to testify before congressional committee
* Hedge funds take a hit in May
* Futures up: S&P 10 pts, Dow 63 pt, Nasdaq 18.50 pts
By Edward Krudy
NEW YORK, June 7 (Reuters) - U.S. stocks looked set to rally on Thursday after the Chinese central bank cut bank lending and deposit rates, fueling hopes of coordinated action to aid a flagging global economy.
The surprise move by China’s central bank to cut benchmark interest rates by 25 basis points to shore up slackening economic growth comes a day after hopes of more stimulus by central banks drove U.S. stock indexes up more than 2 percent in a sharp turnaround from recent heavy losses.
The rate cut in the world’s No. 2 economy had a sudden and dramatic impact on U.S. companies linked to China’s commodity-hungry industrial output. U.S. Steel Corp jumped 3.1 percent in premarket trading, and miner Freeport-McMoRan Copper & Gold Inc jumped 2.4 percent.
“It’s more indication that interest rates are crumbling around the world, which should help stabilize economic activity going forward and should be positive for equities,” said Peter Cardillo, chief market economist at Rockwell Global Capital in New York. “The move ... certainly indicates economies have slowed, but cheaper money should help stabilize the global economy.”
Later Thursday, Federal Reserve Chairman Ben Bernanke will testify before a congressional committee. Investors will parse his words closely after his No. 2, Janet Yellen, said the Fed was ready to support to the fragile economy.
The number of Americans lining up for new jobless benefits fell last week for the first time since April, a reminder that the wounded labor market is still slowly healing.
S&P 500 futures rose 10 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures added 63 points, and Nasdaq 100 futures rose 18.50 points.
U.S. stocks jumped more than 2 percent on Wednesday, giving the S&P 500 its best day since December, as talk of a rescue of Spain’s troubled banks and hopes for more monetary stimulus sparked a rebound from recent selling.
After the S&P 500’s 6-percent fall in May, and with the index below its 200-day moving average, the market was ripe for a rebound, analysts said. The index has reversed sharply above that closely watched level.
European stocks jumped 1.3 percent in morning trade, adding to the previous session’s sharp rally, following the China rate cut and as investors bet policymakers in Europe could soon unveil measures to prop up ailing Spanish banks.
Even though Spain has not yet requested assistance and is resisting being placed under international supervision, Germany and European Union officials are urgently exploring ways to rescue the country’s banking sector, sources said.
Spain met strong demand when it sold 2.1 billion euros ($2.62 billion) of medium-term and long-term bonds, passing a key test of its ability to tap investors after a minister said earlier this week the country was being cut off from credit markets.
Green Mountain Coffee Roasters Inc is in talks with pharmaceutical companies about developing drinks for its Keurig brewers that it hopes could aid the health of consumers and company margins, a senior executive said.
Chesapeake Energy Corp need not delay its scheduled annual meeting on Friday to allow shareholders more time to investigate the financial dealings of the natural gas company’s embattled chief executive, Aubrey McClendon, a federal judge ruled.
May’s stock market rout dealt a blow to many on Wall Street including several big hedge fund stars whose bets on prominent U.S. companies looked badly timed.
Oracle Corp launched a new suite of cloud-based products on Wednesday to try to catch up with smaller but nimbler vendors, such as Salesforce.com Inc, in the business of hosting and distributing software via the Internet. The stock rose 1 percent to $27.80 premarket in very light trading. (Additional Reporting By Rodrigo Campos; Editing by Chizu Nomiyama and Padraic Cassidy)