By Tommy Stubbington
European stocks dipped from seven-year highs Wednesday and U.S.
equity markets opened with small losses, after U.S. Federal Reserve
Chairwoman Janet Yellen on Tuesday laid the groundwork for interest
rate rises later this year.
The Stoxx Europe 600 index was 0.3% lower in early afternoon
trading, having climbed to its highest close since late 2007 on
Tuesday after an agreement on a four-month extension to Greece's
bailout.
U.S. stocks had posted a modest rise Tuesday to close at fresh
record highs after Ms. Yellen said future interest rate rises will
be clearly flagged, and noted the recent improvement in the U.S.
economy. Ultralow interest rates in the world's largest economy
have been a key support to stock markets around the world in recent
years. At 1445 GMT, the S&P 500 was 0.2% lower and Dow Jones
Industrial Average was down 0.1%.
In Europe, Germany's DAX index was down 0.2%, while the U.K.'s
FTSE 100 slipped 0.6% having climbed to an all-time high on Tuesday
for the first time in more than 15 years. A 9% fall for oil, gas
and minerals equipment engineer Weir Group did little to help the
U.K. blue-chip index, following the company's downbeat outlook for
2015 oil & gas demand. The oil and gas sector has the largest
weighting on the FTSE 100, according to FTSE Group data.
Greece's main stock market, which soared almost 10% on Tuesday,
was 1.7% lower. Greek government bonds were steady after hefty
gains. Greek bank stocks were however in the doldrums with Piraeus
Bank down 13%, National Bank of Greece 10% lower, Eurobank Ergasias
down 8.1% and Alpha Bank down 4.4%. European economist Fabio
Balboni at HSBC warned that the situation for Greek banks "remains
challenging", although he said if Tuesday's deal stops outflows
from bank deposits, "It should also reduce the likelihood that
capital controls have to be imposed to avoid a collapse of the
banking system."
In currency markets the dollar, which had weakened following Ms.
Yellen's testimony to Congress, had recovered a little. The euro
was flat against the dollar at $1.1347 while sterling climbed 0.1%
to $1.5495.
"Markets appear to have been positioned for a more definitive
signal" that the Fed will alter its language on the timing of rate
hikes in its March statement to remove the word 'patient', said
currency strategists at BNP Paribas.
In commodities markets, Brent crude oil was 0.7% higher at
$59.07 a barrel, while gold rose 0.7% to $1,205.30 an ounce.
Later Wednesday, Fed Chair woman Yellen will undergo the second
day of her testimony, this time in front of a House of
Representatives' financial services committee. U.S. new home sales
for January are also on today's economic agenda.
Write to Tommy Stubbington at tommy.stubbington@wsj.com
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