Wall St higher after Yellen signals gradual rate hikes

Adjust Comment Print

Europe's main stock markets were mostly higher on Thursday after being boosted the previous day by supportive remarks from Federal Reserve chief Janet Yellen. Info tech and real estate led the day with gains of more than 1.3%, but every sector rose.

-German benchmark bund yields rose three basis points to 0.58 percent.

The next focus for markets will be Yellen's testimony to the Senate Banking Panel and USA inflation data on Friday. The dollar index, which tracks the greenback against six major rivals, was little changed on the day at 95.742 after earlier falling to 95.464, its lowest since October 2016, while the euro slid 0.06 percent to $1.1403.

As to whether the Fed might consider lifting its 2% inflation target, that's not under discussion, says Yellen. "Stock markets love low interest rate levels and for that reason they were able to rise sharply which lifted the Dow to a new all-time high", he said.

In her prepared testimony before the House Financial Services Committee, Yellen sounded upbeat on USA economy and said she expects additional gradual rate hikes to be appropriate over the next few years to sustain the economic expansion and return inflation to the Fed's 2% goal.

All this doesn't mean Yellen's testimony was vanilla. She also talked about how inflation might respond to what she called "tightening resource utilization".

Still, Trump's policy overhauls could have a positive impact on the economy if done properly, Yellen said.

Brent futures gained 1.5 per cent to US$48.25 per barrel.

"I am very focused on trying to achieve our congressionally mandated objectives and I really haven't had to give further thought at this point" to the question of serving a second term, Yellen told Rep. Carolyn Maloney, D-New York.

United States crude is also higher - up 1% to stand at $45.49 a share.

USA yields fall to multi-week lows. The S&P 500 is set to open up by 0.15% at 2,447. Chart source: The thinkorswim® platform from TD Ameritrade.

She could send a strong signal on the willingness to hike in September or wait for more information.

European shares are expected to rise, with spread-betters looking to gains of 0.3 per cent in Germany's DAX and Britain's FTSE, and a 0.2 per cent rise in France's CAC at the opening. The wild card is whether slow wage growth might be making consumers more cautious about big-ticket items.

USA stocks rose toward records, Treasuries rallied and the dollar retreated after Janet Yellen signaled the Federal Reserve won't rush to tighten monetary policy as inflation remains persistently below target.

The Fed raised short-term interest rates in June - the third rate hike since December.

As far as the balance sheet is concerned, plans to implement a reduction are likely to be implemented this year. "The fact that it seems like the Fed is going to take it slowly is being seen as a good sign by the equity markets and by the currency markets".