Asian stocks benefit as Yellen springs no surprises

Asian stocks benefit as Yellen springs no surprises

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Wednesday 05:30 GMT. Asian equities continued to edge higher with support from Wall Street, in spite of less than encouraging data from Japan.

Japan’s Nikkei 225 average was up 0.5 per cent as Japanese markets reopened after Tuesday’s public holiday

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The gains were notable because new Federal Reserve Chairwoman Janet Yellen, in her first testimony to Congress, hinted that she would ignore market turmoil outside of the US – unless it directly affected the domestic economy.

“Our sense is that at this stage these developments do not pose a substantial risk to the US economic outlook,” said Ms Yellen. “We will, of course, continue to monitor the situation.”

Japanese equities have been among the hardest hit asset classes during the global sell-off in recent weeks, with the Nikkei 225 falling by double digits.

But investors were soothed by other comments by Ms Yellen suggesting there would be “a great deal of continuity” in monetary policy under her command.

In the US, the S&P 500 pushed up 1.1 per cent, a fifth straight gain.

The Jakarta Composite, a top performing index in Asia in spite of Indonesia being a member of the “fragile five,” rose 0.3 per cent. It is now up almost 5 per cent in 2014.

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Hong Kong’s Hang Seng index rose 1.1 per cent, while the Shanghai Composite inched forward 0.2 per cent.

Analysts said Ms Yellen offered no real surprises, but her reassurance of loose policy and a positive outlook were taken as bullish signals.

“The Fed sees employment expanding at a moderate pace this year with inflation moving back towards 2 per cent over coming years,” wrote Michael Carey, chief North America economist for Crédit Agricole.

Global investors were also relieved by the Republican-led House of Representatives voting to lift the US debt ceiling for a year without demanding policy concessions from President Barack Obama.

In Tokyo, the upbeat mood was unaffected by data suggesting the nation’s major manufacturers were reining in spending ahead of the consumption tax increase in April.

Core machine tool orders – a forward-looking measure for private business investment – plunged 15.7 per cent in December, about four times worse than estimates looking for a 4 per cent decline.

“The sharp fall in machinery orders in December casts doubt on whether the fledgling recovery in business investment will continue,” wrote Capital Economics analyst Marcel Thieland.

The year-to-year advance was trimmed to just 6.7 per cent – the slowest pace since July – from 16.6 per cent a month earlier.

The 280 Japanese manufacturers surveyed also forecast that orders will fall 2.9 per cent in the January-March quarter, following three quarterly advances.

However, Mr Thieland noted companies tend to be cautious in their outlooks. “Companies had predicted a fall in orders for each of the past three quarters, but orders rose in all of them,” he wrote.

In Australia, the S&P/ASX 200 rose 1.1 per cent for a fifth straight daily gain thanks to some solid earnings.

Commonwealth Bank of Australia rose modestly after reporting a 14 per cent gain in net profit to A$4.27bn for the half-year ending December 31, beating estimates of A$4.1bn. said it had “continued revenue momentum” in spite of “subdued market conditions”.

OZ Minerals climbed 13 per cent. The mining company reported a quarterly loss of $A295m but also said Terry Burgess, chief executive, would step down within a year and that it would consider selling a majority stake in a copper project.

Boral rose nearly 9 per cent after the construction materials maker reported a 73 per cent increase in net profit to A$90m for its past six-month period.