United States Federal Reserve Chairwoman Janet Yellen made a much-awaited speech at the annual Jackson Hole summit. In the speech, Yellen was quite optimistic about the United States economy and the global economy in general. She did not explicitly say that an interest hike was ahead, but she implied that this might be so in a couple of months. She also said that the central bank will take a slow approach to raising borrowing rates. Despite Yellen’s cautionary tale, she also expressed a brighter horizon in the economy.
How do we interpret this in layman’s terms? According to experienced investors, Yellen simply acknowledged that there might be a rate hike in the future, but there is also concrete evidence of GDP growth, and much-anticipated economic recovery. Our trade experts at XTrade Europe anticipate that there will be a 34 percent chance of an interest rate hike by the central bank next month.
How European Traders Reacted to Yellen’s Speech
Investors put the speech of Federal Reserve Chair Janet Yellen to heart and reacted consequently. They were listening intently for hints on an announced interest rate hike by the United States. There have been hints from other officials from Fed earlier about a possible hike on interest, so investments were put on hold and investors were very cautious in the European markets. The speech did hint of an interest hike, but also expressed a lot of gains in the future.
As a reaction to Yellen’s speech, stocks closed higher that afternoon. Notable markets FTSE, DAX, CAC, and IBEX 35 all closed positively after Yellen’s speech. The United Kingdom’s FTSE closed with a .4 percent higher gain, same with the France’s CAC 40 and Germany’s DAX. Dublin’s ISEQ Overall Index also closed on a high note, at .85 percent. Even the markets of Spain and Italy have advanced by .7 percent following the speech.
XTrade Europe says that investors’ caution and reactionary actions are typical, especially with the US dollar now being seen as a stronger currency against both the Euro and the Sterling Pound. The European economy will adhere to the path that the Federal Reserve has set.
XTrade Europe Report: Current State of the Market
Let us take a look at specific shares in the pan-European indices STOXX 600, Britain’s FTSE 100, Germany’s DAX, and other European markets.
Stocks of Dutch Software Company Gemalto rose by over 7%, as they announced an increase in their net profit this year.
German Car Company Volkswagen had shares that closed 3% higher. Volkswagen was able to recover after they compensated U.S. dealers with over $1.2 billion because of an emissions scandal. XTrade Europe says that sometimes, seeing that a company owns up to their mistakes can cause investors to trust the company more.
BAE Systems, a British aerospace technology and security company, also closed on a positive note.
The unresolved public spat between Italy’s Mediaset and France’s Vivendi caused the shares to plummet slightly.
In the Dublin market, the packaging company Smurfit Kappa had shares that rose up to 3.6 percent, making them the current market leader. Irish company C & C’s shares also rose by 2.5%.