Stocks gained on markets worldwide on Monday, while the US dollar edged lower against major currencies after Federal Reserve Chair Janet Yellen said US interest rate hikes are likely on the way, but dropped a reference to the timing of any increase.

Yellen's remarks caused US Treasury yields to pare gains and limited a rally in oil prices, which hit a seven-month high earlier in the session on supply worries.

In the last public comment from any US central banker before the policy meeting next week, the Fed chief said last month's jobs report was “disappointing” and bears watching, though she warned against attaching too much significance to it on its own.

“If incoming data are consistent with labour market conditions strengthening and inflation making progress toward our 2 percent objective, as I expect, further gradual increases in the federal funds rate are likely to be appropriate,” Yellen said at the World Affairs Council of Philadelphia.

No time-frame given

She was careful, however, not to give a time-frame for raising interest rates, in contrast to a speech on May 27, when she said “probably in coming months such a move would be appropriate''.

To some investors, the absence of a time-frame suggests the Fed will delay its next rate hike well beyond next week, when US central bankers gather to make monetary policy.

“I think she's still committed to rate hikes, but she is emphasizing there's not a timetable. She didn't say 'in the next few months,' which is dovish,” said Bucky Hellwig, senior vice-president at BB&T Wealth Management, in Birmingham, Alabama.

Dollar vs other currencies

The greenback, which suffered its biggest one-day drop against a basket of major currencies in four months on Friday after a poor payrolls report, fell to its lowest in almost four weeks and was last down 0.05 per cent at 93.986.

World equity markets were higher, and MSCI's all-country world equity index was up 0.53 per cent for a third straight session of gain.

On Wall Street, the Dow Jones industrial average ended up 113.27 points, or 0.64 per cent, at 17,920.33. The S&P 500 closed up 10.28 points, or 0.49 per cent, at 2,109.41 and the Nasdaq Composite added 26.20 points, or 0.53 per cent, to 4,968.71.

The S&P 500 hit a 7-month intraday high, helped by Yellen's comments and gains in oil and energy shares.

Europe's broad FTSEurofirst 300 index closed up 0.35 per cent at 1,344.19, bolstered by gains in major mining and oil company shares, including Anglo American, Rio Tinto and BHP Billiton.

In the bond market, US Treasuries reversed some price declines but still ended weaker after Yellen's remarks.

“The mixed message today suggests that Yellen is disinclined to move forward and take the next step in the normalization process in the near-term, but it also does not shut the door on the prospects for a July rate (hike) either,” said Thomas Simons, a money market economist at Jefferies in New York.

10-year notes

Benchmark 10-year notes ended down 6/32 in price to yield 1.723 per cent, up from a two-month low of 1.697 per cent on Friday.

Global oil benchmark Brent initially hit seven-month highs on worries about plummeting Nigerian production but cut gains after Yellen's remarks.

Brent crude settled up 91 cents, or 1.83 per cent, at $50.55 a barrel. US crude settled up $1.07, or 2.2 per cent, at $49.69 per barrel.

Spot gold held steady near a 2-week high and was last up 0.07 per cent to $1,244.99 an ounce.

Related Topics