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Equities slightly down after Yellen's remarks

February 11, 2014

Global stocks remained firm on Tuesday if slightly down from earlier highs as the new Federal Reserve chief Janet Yellen indicated she was fully behind the stimulus withdrawal started by her predecessor.

Though cautioning that the US labour market recovery is "far from complete," she said she plans to press ahead with current plans to trim bond from $85 billion per month to zero over the course of this year. The policymaking Federal Open Market Committee decided last December to start "tapering" its stimulus and has already backed two $10 billion reductions.

"The two key takeaways from Yellen's first congressional testimony on monetary policy is that neither the recent drop off in the pace of employment growth nor the turmoil in emerging markets will prevent the FOMC from continuing to gradually wind down its monthly asset purchases," said Paul Ashworth, chief US economist at Capital Economics.

The stimulus, in its various guises, has helped shore up a number of financial assets over the past few years, notably stocks and emerging market currencies.

Its withdrawal has the potential to raise volatility in the markets as recent events in the emerging world have indicated.

In Europe, Britain'sFTSE 100 rose 0.7 per cent to 6,637.63 and Germany's DAX gained 1.3 per cent to 9,414.20. The CAC-40 in France rose 0.5 per cent to 4,257.48.

In the US, the Dow Jones industrial average was up 0.1 per cent at 15,832 while the broader S&P 500 index rose the same rate to 1,802.

The dollar firmed modestly following her comments, and the euro was trading 0.1 per cent lower at $1.3637 while the US currency was up 0.1 per cent at 102.22 yen.

Yellen will likely remain the focus in the markets as lawmakers quiz her on a whole range of issues.

Earlier in Asia, China's Shanghai Composite added 0.8 per cent to 2,103.67 and Hong Kong's Hang Seng jumped 1.8 per cent to 21,962.98. Australia's S&P/ASX 200 gained 0.6 per cent at 5,254.50. Japan's market was closed for a public holiday. Singapore, Seoul, Bangkok and Jakarta all rose.

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Source: Khaleej Times (United Arab Emirates)

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