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London open: Stocks rise after Fed’s Yellen says rates will rise this year
UK stocks gained after Federal Reserve chair Janet Yellen said an increase in interest rates is likely to happen this year.
Yellen said she expects inflation to return to the Fed’s 2% target over the next few years and that weak growth in emerging economies will not have a big enough impact on the US to influence policy.
“Most FOMC participants, including myself, currently anticipate…an initial increase in the federal funds rate later this year, followed by a gradual pace of tightening thereafter,” Yellen said in a speech at the University of Massachusetts on Thursday evening.
Towards the end of her speech Yellen paused and coughed multiple times before leaving the stage. A Fed spokesperson said she felt dehydrated at the end of a long speech under bright lights. She is said to be better after receiving medical attention.
Connor Campbell, financial analyst at Spreadex said the Fed chair provided “much needed clarity” on interest rates. “This leaves the announcement of a rate-hike in October or December on the cards, providing the kind of future anchoring event for the markets they have been sorely lacking this week.”
Turning to Friday’s agenda, the third and final reading on US gross domestic product for the second quarter is due at 1330 BST. Analysts expect GDP to be confirmed at an annualised 3.7%. The final estimate of personal consumption in the second quarter is projected to be revised to 3.2% from 3.1%.
The US will also see the release of service activity data, the University of Michigan’s consumer confidence report and remarks from Fed policymaker James Bullard.
In company news, the UK government has cut its stake in Lloyds Banking Group to 11.98% from 12.97% in August. Shares rose 1.46% in the lender.
Glencore rebounded from the previous day’s tumble as Goldman Sachs flagged concerns on the company’s recent steps to reduce debt and balance sheet.
