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MW Nikkei, other Asian markets jump on Yellen’s bullish comments
 
After a day’s respite, investors in Asia regained their risk appetite for equities Wednesday, taking their cue from a bullish overnight session in the U.S. following upbeat testimony from Federal Reserve Chairwoman Janet Yellen.

“We have this strong lead that we cannot ignore from Wall Street,” said Jingyi Pan, a market strategist at IG Group. The S&P 500 and Nasdaq Composite have risen in the past six sessions, with the tech-heavy index closing at record highs for all of them. The Nasdaq hasn’t had such a run since December 1999.

Asia’s gains were led by Japan, with the Nikkei Stock Average NIK, +1.03% closing up 1% to reverse a Tuesday-afternoon selloff which occurred as the yen gained. But the currency pulled back in the wake of Yellen’s comments as the dollar broadly rose. The greenback USDJPY, +0.27% was recently around ¥114.54.

Yellen suggested the Fed’s next rate increase could come as soon as next month. However, most investors are skeptical of that, and the futures market currently shows a 13% probability of another quarter-point increase in March, according to CME data.

The Fed chairwoman had a longer list of things to be positive about regarding the economy than be worried about, including anticipation of continued job-market improvement amid moderate economic growth and healthy consumer spending.

Still, “markets are pricing in slightly higher odds of Fed rate increases after Yellen’s testimony to the Senate was viewed as more hawkish than expected,” Commerzbank said.

But some have sounded a note of caution about the potential implications of rising rates for Asia.

“Good news for the U.S. market might not necessarily benefit emerging markets,” said Margaret Yang, a market analyst at CMC Markets. “A rising U.S. dollar and tightening U.S. monetary policy could potentially draw capital away from emerging markets,” pressuring their stocks, currencies and bonds.

In Japan, the expectation of higher bond yields boosted insurers; MS&AD 8725, +4.02% and Dai-ichi Life 8750, +4.53% rose 5% to respective 18- and 15-month highs. However, Toshiba 6502, -8.75% Toshiba slid a further 9% on the news that the company is increasing its anticipated write-down for its nuclear business to $6.3 billion.

Meanwhile, SoftBank rose 1.6% after it agreed to buy asset manager Fortress Investment for $3.3 billion, as part of a move by the Japanese technology giant to transform itself into one of the world’s largest investment firms.

Elsewhere, the Hang Seng Index HSI, +1.23% gained 1.2% and Australia’s S&P/ ASX 200 XJO, +0.94% rose 0.9% as Commonwealth Bank CBA, +2.30% posted a record fiscal first-half profit and raised its dividend. It climbed 2.4% and fueled gains for the other Big Four banks; collectively, they account for about a third of the index’s weighting.

Gains for leading stock indexes in China and South Korea were more muted, with the latter held back by weakness in Samsung Electronics as prosecutors said they would seek a fresh arrest warrant for the Samsung conglomerate’s de facto leader, Lee Jae-yong

Despite recent stock gains—including increases in five straight days going into Wednesday for the Shanghai Composite SHCOMP, -0.15% ; rising in 13 of the past 16 sessions—a continued lack of clarity about where the Trump administration is headed is weighing on markets and directing the recent short-termism in investor behavior. The Shanghai Composite closed 0.2% lower on Wednesday.

“Despite the fact that [Trump] has been in office for three or four weeks, he hasn’t really been providing a lot of the positive leads,” said Pan. “Even the tax plans are still uncertain at the moment. The market seems hopeful, but at the same time nobody wants to really err on the bullish side [in case] we see any disappointment.”
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