Business

Dollar, shares gain on Yellen speech, US GDP

Share
Dollar, shares gain on Yellen speech, US GDP

In economic news, growth in the US economy was revised higher for the April-to-June period.

The dollar rallied on Friday after US Federal Reserve Chair Janet Yellen left the door open to an increase in interest rates later this year, putting the greenback on track for its best week in over two months.

Additionally, real gross domestic product (GDP) increased at an annual rate of 3.9 percent in the second quarter of 2015, the U.S. Commerce Department said Friday. The strength came from gains in consumer spending, business investment and residential construction. The jarring combination of last week's Federal Reserve decision to keep rates unchanged and Thursday's speech on what happens next makes Janet Yellen his equivalent as an unreliable girlfriend.

THE QUOTE: "A gradually increasing rate environment is a positive, because it sends a signal... that the U.S.is on a good, if not great, recovery to growth", said Scott Keifer, global investment specialist at JPMorgan private bank. Nevertheless, the forward guidance policy adopted in recent years by many central banks is in tatters, and is probably doing more harm than good in telling companies and consumers when borrowing costs are likely to rise and at how fast. He cited the example of Brazil which lowered its rate even as the economy was growing at a healthy seven percent, leading to a credit spree and over-spend, resulting in high inflation and slow growth later on. However, for the week, gold gained 0.69 percent.

Autocatalyst maker Johnson Matthey was up 5 percent, rebounding from Tuesday's heavy sell-off amid the scandal at German carmaker Volkswagen AG, which said it had cheated in US emissions diesel tests. The company named Matthias Mueller, the head of the group's Porsche unit, to be the new CEO. "24 lows". The UK's FTSE 100 Index shed 1.2 percent, while France's CAC 40 Index and Germany's DAX Index each slid 1.9 percent. Strategists are still clinging to the view the U.S. Treasury yield curve will normalise just as they expect US monetary policy to eventually return to something similar to what it was before the financial crisis.

Intel rose 1.5 percent to $28.92 after JMP Securities upgraded the stock to "market perform". The dollar was up 0.47 percent against the franc at 0.97985 franc. The benchmark has lost 5.7 percent in the third quarter, on its way to its first consecutive quarterly declines since 2011, with equities pressured as China's slowdown weighed on sentiment. The euro, having earlier fallen over one per cent to as low as $1.1116, recovered to $1.1166 as traders arrived at their desks in New York, though it was still down 0.6 per cent on the day. Brent Crude, a benchmark for many global oils, fell 11 cents to $48.75 a barrel in London.

Share