Stocks rise before Yellen speech; dollar holds steady versus majors

Brent climbs to 7-month high; gold little changed

NEW YORK, June 6, (Agencies): World stocks and US Treasury yields rose on Monday ahead of an impending speech by Federal Reserve Chair Janet Yellen on monetary policy, while the US dollar steadied against a basket of key currencies, stabilizing above its lowest in more than three weeks.

A gauge of global equity markets ticked higher, lifted by energy stocks, as Brent crude oil prices jumped to a fresh seven-month high following Friday’s sharp slide in the dollar.

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, was last down 0.02 percent at 94.007.

Traders awaited clues on the timing of a Fed interest rate hike from Yellen, who is scheduled to speak about the US economy and monetary policy at an event in Philadelphia at 12:30 p.m. (1630 GMT).

On May 27, Yellen said a rate increase might be appropriate in the coming months if the economy and jobs market improve further.

“After Friday’s data, markets are clearly interested in any change in her message from two Fridays ago,” ScotiaBank analysts wrote in a research note.

World equity markets were higher, and the MSCI’s all-country world equity index was up 0.57 percent, on pace for its third session of gains.

On Wall Street, the Dow Jones industrial average was up 99.44 points, or 0.56 percent, at 17,906.5, the S&P 500 was up 9.5 points, or 0.45 percent, at 2,108.63 and the Nasdaq Composite added 19.03 points, or 0.39 percent, at 4,961.55.

Europe’s broad FTSEurofirst 300 index was up 0.51 percent at 1,346.36, bolstered by gains in major mining and oil company shares, including Anglo American, Rio Tinto and BHP Billiton.

Brent crude oil prices rose above $50 a barrel to their highest since early November, lifted by Friday’s dollar weakness that could spur demand just as attacks on Nigerian oil infrastructure tightened supplies.

US

US stocks pared some of their gains on Monday after Federal Reserve Chair Janet Yellen painted a mostly positive picture of the economy and said interest rates were still on their way, but was less specific on the timing.

Yellen said "positive economic forces have outweighed the negatives," but was more vague in her references to the timing of a rate hike than she had been in early May when she said the Fed could move "in coming months."

Despite paring some gains, the Nasdaq and the S&P 500 were on course for their highest one-day percentage gains since May 27. The Dow was set for its best day since May 25, the last time it ended up more than triple digits in terms of points.

“The market is interpreting them as relatively mixed, if anything marginally less hawkish, but there’s not a great deal of clear market direction in these comments yet,” said Ian Lyngen, senior government bond strategist at CRT Capital in Stamford, Connecticut.

At 12:58 p.m. ET (1658 GMT) the Dow Jones Industrial Average was up 66.64 points, or 0.37 percent, at 17,873.7.

The S&P 500 was up 4.45 points, or 0.21 percent, at 2,103.58 and the Nasdaq Composite was up 13.57 points, or 0.27 percent, at 4,956.09.

Six of the 10 major S&P sectors were higher, led by the energy index’s 1.3 percent gain although crude prices pared gains sharply after Yellen’s remarks.

The financial index also pared some gains and was up 0.4 percent. The index dropped 1.4 percent on Friday, weighing on the entire market, as chances of a rate hike in June faded.

AbbVie was down 4.5 percent at $61.95 after Cowen cut its rating on the stock to “market perform” from “outperform”.

Europe

The pound came under renewed pressure Monday after polls put the British referendum vote back on a knife-edge, but the London stock market rallied to outperform its eurozone rivals.

Britain’s currency dropped to around three-week lows against the euro and dollar, before rebounding.

The euro hit 79.05 pence in Asian trading hours -- the European single currency’s highest level against sterling since mid-May.

And the pound slid to $1.4353 -- a three-week low point.

“The polls are having a significant impact on the pound,” said Craig Erlam, senior market analyst at Oanda trading group.

Traders on Monday were reacting to a series of polls, one of which showed Brexit backers moving into a lead in the polls for the first time in weeks, raising pressure on Prime Minister David Cameron ahead of Britain’s June 23 EU referendum.

Financial markets have proved volatile ahead of the vote that could see Britain becoming the first country to drop out of the EU and have proved particularly so as the campaign has heated up.

In Europe, London’s benchmark FTSE 100 index outpaced rival Frankfurt and Paris markets, jumping by 1.0 percent for the day.

“Commodity stocks are continuing to benefit from Friday’s sharp drop in the US dollar, which along with noises from the US about China reducing its excess steel capacity as part of a bilateral trade agreement, is supporting a rise in metals prices,” said CMC Markets analyst Jasper Lawler.

Shares in miner Anglo American were the biggest gainer on the FTSE 100, jumping 11.1 percent. Commodities trading giant Glencore shot up 6.9 percent, and Rio Tinto 6.4 percent.

Frankfurt’s gains were capped as official data showed that weakness in China and Germany’s other export partners had prompted the biggest drop in industrial orders for Europe’s top economy in more than a decade.

■ Key figures around 1540 GMT London - FTSE 100: UP 1.0 percent at 6,273.40 points (close)

Frankfurt - DAX 30: UP 0.2 percent at 10,121.08 (close)

Paris - CAC 40: UP 0.04 percent at 4,423.38 (close)

EURO STOXX 50: UP 0.3 percent at 3,007.16

Asia

Most Asian markets rose Monday while the dollar clawed back some of its hefty losses after last week’s soft US jobs report reduced the chances of an imminent interest rate rise, but the stronger yen hit Japanese exporters.

Traders who had been expecting the Fed to announce a rise no later than July — with the central bank having hinted at such just last month — were caught off guard.

The dollar was sent plunging two percent against both the yen and the euro on Friday but made some minor headway in afternoon trading Monday.

The greenback edged up to 107.13 yen from 106.63 yen in New York but was still sharply down from levels above 109 yen before the jobs report.

The yen’s rise hit Japan’s exporters, although afternoon buying pared early losses. The Nikkei closed 0.4 percent down, having sunk more than one percent in the morning.

Shanghai ended 0.2 percent lower while Hong Kong added 0.4 percent and Sydney was 0.8 percent higher.

■ Key figures around 0800 GMT Tokyo — Nikkei 225: DOWN 0.4 percent at 16,580.03 (close) Shanghai — Composite: DOWN 0.2 percent at 2,934.10 (close) Hong Kong — Hang Seng: UP 0.4 percent at 21,030.22 (close)

Oil

Brent crude oil prices rose to a fresh seven-month high on Monday, lifted by a fall in the dollar that could spur demand just as attacks on Nigerian oil infrastructure tighten supplies, but signs of recovering US output capped gains.

Brent crude futures were up 97 cents at $50.61 a barrel at 1244 GMT after hitting a high of $50.78. US crude futures were up $1.02 cents at $49.64 a barrel.

Traders said oil prices rose on a sharp fall in the dollar on Friday after weak US jobs data sparked concerns over the state of the world’s biggest economy, cutting expectations of a near-term cut in US interest rates.

A weaker dollar supports fuel demand in the rest of the world as it makes dollar-traded oil imports cheaper.

Traders will be watching Fed Chair Janet Yellen’s speech at 1630 GMT on Monday for hints of a potential rate move.

Total announced that three of its five French refineries were resuming operations after several weeks of strikes, which is a positive for crude demand, but work at France’s major crude terminals was still halted.

The Muslim holy month of Ramadan began on Monday and is seen as supportive of prices as driving demand picks up in most Muslim-dominated countries.

Traders said prices were also propped up by attacks on oil infrastructure in Nigeria, which has already sent the country’s output to more than 20-year lows.

So far, supply cuts like those in Nigeria or Libya, have been met by rising output in the Middle East, especially Iran, which has ramped up output since the end of international sanctions against it in January.

But Iran is returning to international oil markets more quickly than expected and is quickly returning to its maximum capacity.

This means that further disruptions in global supplies might not be compensated by rising Iranian output.

Oil’s price rally, however, was capped on signs of increased output in the United States where energy firms this week added rigs drilling for oil for the second time this year, energy services company Baker Hughes Inc said on Friday.

Rising prices have encouraged producers to cautiously increase activity. Drillers added nine oil rigs in the week to June 3, raising the rig count to 325 but still well below the 642 at work a year earlier, Baker Hughes said.

Gold

Gold steadied on Monday ahead of a keenly-anticipated speech by Federal Reserve chair Janet Yellen, having earlier hit its highest in two weeks after surprisingly weak US jobs data sparked a 2.8 percent rally on Friday.

Investors are awaiting further clues on the path of US interest rates in the wake of the data, which analysts say cut the chance of a rate hike in June. Rising rates lift the opportunity cost of holding the non-yielding metal, while boosting the dollar, in which it is priced.

Spot gold was at $1,243.60 an ounce at 1350 GMT, little changed from $1,244.09 late on Friday, having earlier risen to its highest since May 24 at $1,248.40 an ounce. US gold futures for June delivery were up $2.70 an ounce at $1,245.60.

“There is a lot of uncertainty in the market over whether we are going to see interest rate hikes in the US or not,” Commerzbank analyst Eugen Weinberg said. “That is the single most important factor in the gold market right now.”

Bullion, which has gained about 17 percent this year, had been under pressure in recent weeks as comments from senior US central bank officials, including Fed chief Janet Yellen, boosted expectations of an imminent interest rate rise.

Traders’ and investors’ focus shifted to a speech by Fed Chair Janet Yellen at the World Affairs Council of Philadelphia at 1630 GMT, looking for further clues on interest rates. “Although prices could still work a bit higher from here over the course of the month, we think values will be hard pressed to push above the $1,275 range over the course of June,” said INTL FCStone analyst Edward Meir.