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Markets calm ahead of Yellen Testimony

Volatility has eased off after a tumultuous couple of weeks.

Last week ended up a strong week for US stocks after a few bumps and scares. The new week has begun in low-key fashion, with stock prices little changed as investors hold back a day ahead of Fed Chairman Janet Yellen’s first testimony on monetary policy.

By early afternoon in New York, the Dow Jones was down by 0.14% or 21 points at 15,772, while the S&P 500 declined by just 0.01%.

Shares in Apple rose 1.75% after activist investor Carl Icahn announced that he is ending his campaign to push the iPhone maker into buying back $50 billion of its shares this year.

It’s an interesting time for the market to hear from Ms Yellen, hot on the heels of a the second of two successive weak employment reports and not long after the mini-crisis in emerging markets. The Fed has already introduced two reductions in the pace of its stimulus and this is a chance for investors to hear whether Ms Yellen foresees further reductions as the most likely path, as has been suggested in recent comments from other Fed officials.

On Friday we saw non-farm payrolls coming in well below expectations, and no significant revision to December’s very soft payroll growth; given the Fed has said the decision on tapering will be contingent on incoming data, I will be keen to hear what Ms Yellen has to say about the labour market.

The forex market has also been quiet ahead of Ms Yellen’s testimony, with narrow ranges in the major currency crosses. GBP/USD was down just 0.02% with a range for the day of fewer than 50 pips.

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