World stock markets diverge ahead of US Fed speech

Ben PERRY
 

World equity markets were mixed Friday 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.

Oanda analyst Craig Erlam estimated that the odds were now more than 75 percent 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 on Friday 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.

Yellen is due to start speaking around 1700 GMT.

Fed governor Lael Brainard, a so-called "dove" on monetary policy, suggested rates could rise soon.

- 'Fait accompli' -

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 yen 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 two percent Thursday in reaction to the stronger dollar -- which makes the commodity more expensive for holders of other currencies -- and news that Russia was well short of its promised output cuts.

Despite agreeing to slash production as part of a deal with global producers to address a global glut, Moscow's reductions were only a third of what it pledged in January and February.

- Key figures around 1650 GMT -

New York - Dow: UP 0.1 percent at 20,975.10. points

London - FTSE 100: DOWN 0.1 percent at 7,374.26 (close)

Frankfurt - DAX 30: DOWN 0.3 percent at 12,027.36 (close)

Paris - CAC 40: UP 0.6 percent at 4,995.13 (close)

EURO STOXX 50: UP 0.5 percent at 3,403.39 (close)

Tokyo - Nikkei 225: DOWN 0.5 percent at 19,469.17 (close)

Hong Kong - Hang Seng: DOWN 0.7 percent at 23,552.72 (close)

Shanghai - Composite: DOWN 0.4 percent at 3,218.31 (close)

Euro/dollar: DOWN at $1.0550 from $1.0560

Pound/dollar: UP at $1.2244 from $1.2234

Dollar/yen: UP at 114.60 yen from 114.45 yen

Oil - Brent North Sea: UP 54 cents at $55.62 per barrel

Oil - West Texas Intermediate: UP 61 cents at $53.21

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