Yellen paves the way for rate hike

By Trevor Hoey. Published at Feb 15, 2017, in Features

After weakness in morning trading, US markets resumed their upward trend with the Dow increasing from its previous day’s close of 20,412 points to hit 20,500 points as markets drew to a close.

The release of positive commentary by Federal Reserve Chairwoman, Janet Yellen on the state of the US economy which included the likelihood of rate rises sooner rather than later provided robust support for financial stocks, a sector that has already performed well over the last three months.

There were strong moves from JP Morgan Chase (+1.6%) and Goldman Sachs group (+1.3%).

Once again, all major indices in the US were up with the S&P 500 and NASDAQ set to close at new record highs as the bell approached.

European markets were mixed with the FTSE 100 down approximately 0.1%, closing at 7,268 points.

The DAX was flat, while the Paris CAC 40 gained nearly 0.2% to close at 4,895 points.

On the commodities front, oil continued to be range bound between US$53 per barrel and US$54 per barrel, albeit tracking towards the lower end of that band as markets drew to a close.

Gold traded in a volatile fashion, increasing from the previous day’s close of US$1,226 per ounce to hit a high of US$1,236 per ounce before plunging into negative territory on the back of Yellen’s commentary.

However, there was renewed strength in afternoon trading as the precious metal pushed past US$1,230 per ounce before closing just below that level.

The big news on the metals front was a spike in the iron ore price which was already at long-term highs. The surge of more than 5% which saw it hit US$92 per tonne has some analysts querying whether the bullish run is sustainable.

The last time iron ore traded at these prices was in mid-2014. Sustainable or not, it would appear that the likes of Rio Tinto, BHP Billiton and Fortescue Metals Group could continue their upward momentum today.

Base metals were mixed with the best performance coming from nickel as it touched on US$4.90 per pound, a level it hasn’t traded at since December.

The prospect of a relatively near-term interest rate hike had little impact on the Australian dollar as it remained in the vicinity of US$0.765.

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