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World markets awaiting Bernanke speech

In Europe, the FTSE 100 index of leading British shares was down 2.62 points, or 0.1 percent, at 5,319.740 while Germany’s DAX fell 13.72 points, or 0.2 percent, to 5,803.93 The CAC-40 in France was 3.85 points, or 0.1 percent, lower at 3,842.77.

On Wall Street, the Dow Jones industrial average was up 45.27 points, or 0.4 percent, at 10,434.17 soon after the open while the broader Standard & Poor’s 500 index rose 3.71 points, or 0.3 percent, to 1,109.69.

Most attention is focused on the currency markets after Friday’s much stronger than anticipated U.S. jobs data for November stoked talk that the Fed will be able to start withdrawing some of its extraordinary policy measures sooner than had been priced into the markets, a move that could support the dollar.

Jane Foley, research director at Forex.com, said the markets “were coming to terms with the fact that the run of cheap financing from the Fed could soon be drawing to a close.”

The biggest impact from Friday’s U.S. jobs data has been felt elsewhere though — the dollar has clambered off multi-year lows against the yen and near 16-month lows against the euro as U.S. Treasury yields increased sharply.

By mid afternoon London time, the euro was a further 0.3 percent down on the day at $1.4806. However it had earlier fallen to $1.4757, its lowest level since early November.

Forex.com’s Foley said the fear of an earlier than anticipated Fed rate hike has become “sufficiently tangible for the dollar to cast off its role as funding currency and break its negative correlation with risk.”

Bernanke’s remarks this evening could be key, she added. Bernanke addresses the Economic Club of Washington later and any reaction to Friday’s jobs data could be key as the markets position themselves for the year-end and plot out a monetary policy course for next year.

One of the main impacts from the dollar’s rally since Friday has been to send commodity prices down, most notably gold, which has fallen sharply from near-record highs — a stronger U.S. currency typically causes commodity markets, priced in dollars, to fall. An ounce of gold was down a further 2 percent at $1,145.80, way lower than last week’s record high above $1,225.

As a result, commodity stocks were hit hard — in London, Eurasian Natural PLC, Xstrata PLC and Fresnillo PLC were three of the biggest fallers on the FTSE 100.

“A firmer dollar points to a temporary correction in commodities and equities,” said Neil Mackinnon, global strategist at VTB Capital.

Earlier in Asia, Japanese stocks were buoyed by the weaker yen, which makes the country’s exports into the United States cheaper. Investors were getting increasingly concerned over the last few weeks that the rise in the yen to 14-year dollar highs was threatening to hit the country’s exports.

Japan’s benchmark Nikkei 225 average rose for a sixth straight session, climbing 145.01 points, or 1.5 percent, to 10,167.60, the highest close since late October.

Since Japanese markets closed, the yen has recouped some ground against the dollar, which was trading down 0.5 percent at 89.82 yen. Nevertheless, the dollar is still way up on where it was just ten or so days ago, when it slid to 84.81 yen, its lowest level since mid-1995.

In Hong Kong, the Hang Seng index fell 173.19, or 0.8 percent, to 22,324.96 while in Australia the main index slipped 25.7 points, or 0.6 percent, to 4,676.50.

South Korea’s Kospi gained 0.5 percent and Singapore’s benchmark climbed 0.4 percent. China’s Shanghai index rose 0.5 percent to 3,331.90 after the government pledged to maintain economic stimulus and easy credit policies at a top planning meeting.

Oil prices hovered slipped below $75 a barrel after several OPEC ministers said they don’t expect their group to change production levels at a meeting later this month.

Benchmark crude for January delivery was down 91 cents to $74.56 in electronic trading on the New York Mercantile Exchange.