Yellen’s comments, which came after months of uncertainty on the Fed’s stance on rates swayed the markets, and the strong data today come ahead of the comprehensive United States jobs data at the end of this week.
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Financial spreadbetters predicted Germany’s DAX and France’s CAC 40 to each open up 0.7 percent, after Friday’s gains on Wall Street.
Meanwhile, the US dollar fell to 1.4631 against the pound, from an early 6-day high of 1.4599 and held steady thereafter. An account of the Fed’s most recent meeting, in April, said it was thinking about a June increase, and several of Yellen’s colleagues have made the point explicitly in recent speeches. Fed chair Janet Yellen said on Friday that the central bank should hike rates “in the coming months” if economic growth picks up and the labour market continues to improve. Markets have slowly come to terms over the past week with the higher probability of a June rate hike, placing the odds at about 26%.
MSCI’s all-country world stock index rose 0.2 per cent, while the pan-European FTSEurofirst 300 index of leading regional stocks was up 0.2 per cent.
US stock markets will be closed Monday for the Memorial Day holiday.
In the 12 months through April, the core PCE rose 1.6 per cent after a similar increase in March.
Forecasting firm Macroeconomic Advisers on Friday projected growth in gross domestic product, a broad measure of the goods and services produced across the economy, would accelerate to a 2.5 percent annual rate in the second quarter from the first quarter’s 0.8 percent pace.
Pointing to improvement in the labour market, Yellen said it has almost reached a point that most economists would associate with full employment.
Economists expect USA employers to have added 170,000 jobs this month, slightly more than they did in April. Traders also took some encouragement with report showing the pace of GDP growth in the first quarter was upwardly revised to 0.8 percent from the initial estimate of 0.5 percent.
The euro wallowed around two-and-a-half-month lows, edging down 0.1% to $1.1104.
“If we were to raise interest rates too steeply and we were to trigger a downturn or contribute to a downturn, we have limited scope for responding, and it is an important reason for caution”, Yellen told the audience at Harvard.
In early European trade, Paris eased 0.1 percent and Frankfurt dropped 0.3 percent.
Data showed U.S. consumer spending surged 1.0 per cent in April, its biggest increase in more than six years and beating economists’ expectation of a 0.7 per cent rise.
The yuan slid 0.24 per cent to 6.5807 per dollar, poised for its lowest close since January, after the People’s Bank of China weakened its daily fixing by 0.45 per cent.
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Spot gold was last at $1,202.20-1,202.50 per ounce, down $10.50 from Friday’s close after hitting as low as $1,200 earlier in the day.
