Asian stock markets muted after Yellen speech leaves investors guessing on interest rates

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SEOUL, South Korea – Asian stock markets were muted Monday after Federal Reserve Chair Janet Yellen’s speech left investors guessing about the central bank’s next move on interest rates.

KEEPING SCORE: Japan’s benchmark Nikkei 225 added 0.4 per cent to 15,600.80. South Korea’s Kospi inched up 0.2 per cent to 2,059.74. Hong Kong’s Hang Seng dropped 0.2 per cent to 25,065.73 and China’s Shanghai Composite index fell 0.5 per cent to 2,229.86. Australia’s S&P/ASX 200 was down 0.3 per cent to 5,631.30.

YELLEN’S SPEECH: In her speech to an annual conference of central bankers in Jackson Hole, Wyoming, Yellen said the Great Recession complicated the Fed’s ability to assess the U.S. job market and made it harder to determine when to adjust interest rates that are currently at super-low levels. Yellen offered no signal that she’s altered her view that the economy still needs support from the Fed. That toned down expectations that the U.S. central bank would act soon to raise interest rates. Yellen, however, also said that if improvement in employment continues to be more rapid than expected then the Fed might have to raise rates sooner than it anticipates.

ANALYST TAKE: “After speculative trading on Wednesday and Thursday around the prospect of rates rising sooner than expected based on the release of the Fed minutes, the weekend’s Jackson Hole Symposium has quickly put a lid on these theories,” Evan Lucas, IG’s market strategist, wrote in a commentary.

DATA POINTS: This week’s calendar is heavy with economic data from the U.S. and Japan but it will be an uneventful week in emerging markets in Asia. In the U.S., quarterly gross domestic product will be released on Thursday, giving investors a new update on the health of the world’s largest economy. Mizuho Bank forecast that the U.S. economic growth would be revised down to 3.9 per cent in the second from 4 per cent as consumer spending slightly slowed. Japan will release monthly unemployment and inflation figures on Friday.

WALL STREET: Wall Street paused on Friday with little reaction to the Fed chief’s speech. The Dow Jones industrial average fell 0.2 per cent to 17,001.22. The Standard & Poor’s 500 lost 0.2 per cent to 1,988.40 and the Nasdaq composite added 0.1 per cent, to 4,538.55.

CURRENCIES: The greenback gained ground after Yellen’s speech and a Russian aid convoy’s entry into Ukraine that drew condemnation from the West. The euro fell to $1.3205 from $1.3242 late Friday. The dollar rose to 104.22 yen from 103.96 yen.

ENERGY: Benchmark U.S. crude oil for October delivery was down 10 cents to $93.55 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude fell 19 cents to $102.10 on the ICE exchange in London.

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