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Yellen’s dovish testimony boosts Asian markets

Thursday 3:45 BST

Overview

Asia Pacific equities rose as Hong Kong stocks were on track for their best week in a year, as investors reacted to dovish comments from Federal Reserve chair Janet Yellen.

Hot topic

Hong Kong’s Hang Seng index was up 0.9 per cent at a two-year high heading for its best week in 12 months. Index heavyweights Tencent and HSBC have helped to push the Hang Seng higher with the Chinese social media company up 6.1 per cent for the week.

In Japan, the Topix index was up 0.2 per cent as the information technology sector rose 0.6 per cent while the financial sector fell the same amount. Troubled conglomerate Toshiba lost as much as 5.8 per cent on reports that its auditor informed the company it would not be able to form an opinion on its annual securities report.

Australia’s S&P/AX 200 climbed 0.8 per cent with the health care sector up 1.8 per cent and consumer staples rising 1.6 per cent.

South Korea’s Kospi was up 1.1 per cent to a record high.

In her semi-annual testimony to Congress on Wednesday, Ms Yellen said US policy makers were watching inflation closely as it had not met the central bank’s target, but gave no further clues on the timing of the next rate rise or plans to reduce the central bank’s balance sheet.

The Dow Jones Industrial Average hit a record closing peak on Wednesday, finishing the day up 0.7 per cent at 21,531 while the S&P 500 finished 0.6 per cent higher.

Forex

The dollar index, a measure of the greenback against a basket of peers, was 0.1 per cent weaker at 95.651.

The Canadian dollar was holding at its strongest against the greenback since June 2016 after the Bank of Canada on Wednesday raised rates 25 basis points to 0.75 per cent — the first increase in seven years. The “loonie” was flat at C$1.274 per US dollar.

The Japanese yen was flat at ¥113.18 per dollar.

The South Korean won firmed further after the Bank of Korea upgraded its forecast for 2017 gross domestic product from 2.6 per cent to 2.8 per cent. The South Korean currency strengthened to Won1,137.06 per dollar — a two-week high.

Fixed income

The yield on 10-year US Treasury, which moves in the opposite direction to its price, was 5bp lower at 2.311 per cent, following Ms Yellen’s testimony.

The yield on 10-year Japanese government bonds was down 1bp at 0.069 per cent while the yield on the Australian 10-year notes was down 3.5bp at 2.681 per cent.

Commodities

International benchmark Brent crude was down 0.2 per cent at $47.64 a barrel after settling 0.5 per cent higher on Wednesday following a higher-than-expected fall in US crude stocks. Crude stocks fell by 7.6m barrels last week, according to the Energy Information Administration, the biggest weekly slide in four months.

West Texas Intermediate, the US marker was down 0.3 per cent at $45.37 a barrel.

Gold was up 0.1 per cent at $1,221.43.

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