World equity markets were mixed as investors awaited signals from Federal Reserve chief Janet Yellen about the possible timing of the next interest rate hike. “Global equities are lacklustre into the weekend as profit taking grips investors on both sides of the pond following recent record highs,” said Accendo analyst Henry Croft.
“Investors are also looking ahead to a choir of Fed speakers — including chair Yellen — this afternoon ahead of the central bank’s self-imposed blackout period before the March 15 meeting,” he said. Both London and Frankfurt closed lower, while the French stock markets and the EURO STOXX 50 ended the session higher. The FTSE 100 was down 0.1% at 7,374.26 points, the DAX 30 was down 0.3% at 12,027.36 points, the CAC 40 moved up 0.6% at 4,995.13 points and the EURO STOXX 50 climbed 0.5% at 3,403.39 points at close.
Oanda analyst Craig Erlam estimated that the odds were now more than 75% that a rate hike was forthcoming, with some seeing an even higher probability. Yellen and four more officials, including vice-chairman Stanley Fischer, were scheduled to speak later yesterday and “it is now down to them to fine tune the message and ensure markets are properly positioned ahead” of the next rate-setting meeting, he said.
Fed governor Lael Brainard, a so-called “dove” on monetary policy, suggested rates could rise soon. The “hawks” at the Federal Reserve are more concerned about the threat of rising inflation, especially if tax cuts and spending fuel the economy.
But the “doves” warn of the risk of raising interest rates based on policies that have not been announced, and whose implications cannot yet be measured. Brainard “has tipped the scales in overwhelming favour of a rate hike as the market now views March as fait accompli,” one trader said.
The dollar had rallied strongly since the start of February, but “whether the dollar is able to build on these gains in today’s session will depend on just how hawkish policy makers are,” said Oanda’s Erlam. The greenback broke above ¥114 for the first time in two weeks on Thursday and remained above the level heading into the weekend break. Elsewhere, oil prices climbed after tumbling more than 2% on Thursday in reaction to the stronger dollar — which makes the commodity more expensive for holders of other currencies.—Agencies