NEW YORK - US stocks edged lower and dollar rallied on Tuesday after Federal Reserve chairman Ben Bernanke said the central bank stood ready to take further steps to stimulate the economy but stopped short of signalling any near-term action.

Financial markets had looked forward to Mr Bernanke's testimony for any signs the Fed was moving closer to a third round of bond purchases to support the economy. But he hewed closely to the message of watchful waiting that the central bank's policy panel delivered in June, and yielded few new clues.

The Fed stands ready to offer additional monetary support to a US economy that has slowed significantly in recent months, Mr Bernanke told the Senate banking committee.

"The market was preparing for some signal of imminent policy action from the Fed and they certainly did not get that from the prepared statements," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

A measure of world stock markets was little changed at 308,11, erasing early gains.

On Wall Street, US stocks turned lower. The Dow Jones industrial average was down 77,04 points, or 0,61%, at 12650,17. The S&P 500 index was down eight points, or 0,59%, at 1345,64. The Nasdaq composite index was down 7,91 points, or 0,27%, at 2889,03.

European shares also erased gains to trade slightly lower.

"The initial headlines crossing the wire from Washington tell us little new on Fed thinking," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York. "The lack of specific steps in the headlines has dampened risk appetite with stock prices giving back earlier gains, while the dollar has also flexed its muscles."

The euro hit a session low of $1,2213 after Mr Bernanke's comments and last traded down 0,4% at $1,2224. It had earlier hit a one-week high of $1,2315 shortly after the release of the German ZEW survey of investor confidence, which was not as weak as some had feared.

The dollar gained 0,3% to ¥79,13, a day after dropping to a one-month low. Expectations that the Bank of Japan could intervene to check gains in the yen kept investors wary, traders said.

Brent futures rose 67 cents per barrel to $104,04 a barrel for a fourth straight day of gains. US crude rose six cents to $88,49.

Reuters