Another record high for the S&P 500 on Wall Street on Thursday was also prompting investors to adopt a cautious approach, with analysts wondering whether Yellen’s comments will push the benchmark index above the psychologically-important level of 2,000 for the first time in history.

A three-day weekend was also likely behind the subdued mood, as investors refrain from taking on too much risk ahead of the Bank Holiday.

With decent gains from banking and supermarket stocks being offset by falls from the likes of Petrofac andLondon Stock Exchange early on, the FTSE 100 in London was trading flat at 6,777.6.

Markets are waiting to see whether Yellen, who is due to make a keynote speech at the Jackson Holesymposium of central bankers, hints at the timing of the first rise in interest rates.

A dovish view – stressing the need to keep borrowing costs low for now – could drive gains on equity markets with policymakers happy to await a stronger recovery before tightening, probably by the middle of next year. However, a hawkish standpoint could trigger a sell-off as investors bring forward their expectations for the first rate hike and take profits after the recent rally.

With her topic on ‘Re-evaluating Labour-Market Dynamics’, “some are thinking she may take a less hawkish line that was evident in the [Fed] minutes yesterday, as this is more her area of expertise and it is the labour market that has kept US policy so accommodative for such a sustained length of time,” according to economist Simon Smith from Fxpro.

Banks, supermarket rise; Petrofac and LSE fall

Banking groups HSBC, Barclays, RBS and Lloyds were all in demand in early trading on Friday, along with supermarket rivals Tesco, J Sainsbury and Wm Morrison.

Oilfield services group Petrofac was trading lower after its chairman of three years, Norman Murray, announced his resignation from the board. The company said that he will step down with immediate effect for “compassionate reasons”.

The London Stock Exchange reported a boost to profits from a surge in flotations in its first quarter but shares fell as it unveiled details of a £938m rights issue to bankroll its proposed acquisition of US financial index business Frank Russell.

FTSE 100 – Risers
Barclays (BARC) 223.35p +1.15%
Vodafone Group (VOD) 204.85p +1.11%
Tesco (TSCO) 247.95p +1.00%
HSBC Holdings (HSBA) 647.30p +1.00%
Admiral Group (ADM) 1,336.00p +0.98%
Pearson (PSON) 1,135.00p +0.89%
ITV (ITV) 211.30p +0.86%
Royal Bank of Scotland Group (RBS) 364.00p +0.83%
Lloyds Banking Group (LLOY) 75.77p +0.70%
Schroders (SDR) 2,408.00p +0.67%

FTSE 100 – Fallers
easyJet (EZJ) 1,309.00p -1.13%
Smith & Nephew (SN.) 1,052.00p -1.13%
London Stock Exchange Group (LSE) 1,988.00p -0.85%
Royal Mail (RMG) 436.80p -0.79%
Associated British Foods (ABF) 2,802.00p -0.74%
Sports Direct International (SPD) 713.50p -0.70%
Kingfisher (KGF) 304.70p -0.68%
Diageo (DGE) 1,753.00p -0.68%
Experian (EXPN) 1,033.00p -0.67%
SSE (SSE) 1,510.00p -0.66%

Source: ShareCast