Global markets drift after Yellen speech

European and US equities markets were split on Friday after US Fed chief Janet Yellen suggested interest rates could rise in the near-term.

In words carefully parsed by market watchers, Yellen said recent months had seen conditions in the US economy increasingly favor an increase in interest rates but she did not give a clear signal of timing.

The US Federal Reserve has suffered stinging criticism in recent months for a perceived lack of coherence in its public positions on monetary policy, and markets had eagerly awaited her speech for some policy clarity.

But the reaction of traders on both sides of the Atlantic suggested that there remained many questions about the Yellen-led Federal Open Market Committee's path of US monetary policy.

Major US indices were mixed, with the Dow Jones Industrial Average closing down 0.3 percent, the broader S&P 500 losing 0.2 but the tech-heavy Nasdaq rising 0.1 percent.

European stocks advanced marginally with London and Frankfurt rising 0.3 percent and Paris gaining 0.8 percent by the close.

Noting strong US job growth, Yellen said gradual increases in the Fed's benchmark rate in the coming years should be expected.

"In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months," Yellen said.

- Show us the money -

Traders appeared to see her remarks as a mix of both hawkish and dovish views.

Joel Naroff of Naroff Economic Advisors said US policymakers could easily be dissuaded from increasing rates if skies darkened.

"If we get a softer than expected jobs report or weaker consumption numbers or whatever... the committee could or will likely do nothing," he said in a client note.

Speculation has grown that the bank could lift interest rates as early as next month, although most experts say that is unlikely and that December or February would be safer bets.

"Our view is that most officials will want to see more concrete evidence of a rebound in GDP growth and a rise in inflation towards the 2 percent target, with a December move still appearing the most likely outcome" for a rate rise, Capital Economics ventured.

With an interest rate hike still viewed unlikely in the immediate future, the dollar struggled to gain traction during the day, but ended higher against the euro at $1.1195 and the yen at 101.77 yen. 

- Key figures at 2100 GMT -

New York - DOW: DOWN 0.3 percent at 18,395.40

New York - S&P 500: DOWN 0.2 percent at 2,169.04

New York - Nasdaq: UP 0.1 percent at 5,218.92

London - FTSE 100: UP 0.3 percent at 6,838.5 points (close)

Frankfurt - DAX 30: UP 0.5 percent at 10,587.8 (close)

Paris - CAC 40: UP 0.8 percent at 4,441.9 (close)

EURO STOXX 50: UP 0.9 percent at 3,010.36 (close)

Tokyo - Nikkei 225: DOWN 1.2 percent at 16,360.71 (close)

Shanghai - Composite: UP 0.1 percent at 3,070.31 (close)

Hong Kong - Hang Seng: UP 0.4 percent at 22,909.54 (close)

Euro/dollar: DOWN at $1.1195 from $1.1281 

Dollar/yen: UP at 101.77 yen from 100.55 yen Thursday

Pound/dollar: DOWN at $1.3135 from $1.3187

Source: AFP