US: Stocks, dollar gain as Yellen talks rate hike

[NEW YORK] US stocks and the dollar climbed on Friday after Federal Reserve Chair Janet Yellen implied that interest rates could be lifted soon.

Ms Yellen's much-anticipated remarks came after European markets had already closed with modest gains. The Nikkei climbed 0.4 per cent on hopes of more stimulus following weak Japanese inflation data.

Ms Yellen, speaking at Harvard University, said a US rate hike "probably" would be justified "in the coming months" if economic data continued to strengthen.

"The economy is continuing to improve," she said. "Growth looks to be picking up." Stocks briefly cut their gains following the remarks, but later recovered, with the S&P 500 finishing up 0.4 per cent.

The gains show the market views a rate hike as confirmation US growth is on track.

But Jack Ablin, chief investment officer at BMO Private Bank, noted stocks tumbled in January after initially taking a benign view of the Fed's December rate hike.

"The market is giving permission to the Fed to raise rates," Mr Ablin said. "We'll see what actually happens when they do."

Ms Yellen's remarks also boosted the greenback. The euro fell to US$1.1113 from US$1.1194 on Thursday, while the dollar also advanced on the yen and the pound.

Bourses in Frankfurt, Paris and London all gained about 0.1 per cent, with scant major corporate or economic news to jostle markets.

The Paris stock exchange was taking "a break" after a good run earlier this week, said Saxo Banque analyst Andrea Tueni.

Stocks in Japan rose following government data showing core consumer prices dropped 0.3 per cent in April, dealing a blow to Tokyo's faltering war on deflation and raising pressure on the Bank of Japan to expand its vast monetary easing program.

"If you look at economic and price fundamentals, the BoJ has to ease further soon," said Credit Suisse economist Takashi Shiono.

World oil prices dipped, with traders taking profits after crude rose above the psychological US$50 level this week on evidence of a fall in supplies.

Meanwhile, a Group of Seven meeting wrapped up in Japan with a final communique emphasising that economic growth was an "urgent priority" and highlighting the risk of a so-called Brexit as Britain prepares for a June 23 referendum on whether to leave the European Union.

A Brexit would "reverse the trend towards greater global trade and investment and the jobs they create", and that it would pose a "serious risk to growth," said the G7 statement.

AFP