MW Nikkei, other Asian markets jump on Yellenâ€™s bullish comments
After a dayâ€™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.
â€śWe have this strong lead that we cannot ignore from Wall Street,â€ť 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 hasnâ€™t had such a run since December 1999.
Asiaâ€™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 Yellenâ€™s comments as the dollar broadly rose. The greenback USDJPY, +0.27% was recently around ÂĄ114.54.
Yellen suggested the Fedâ€™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, â€śmarkets are pricing in slightly higher odds of Fed rate increases after Yellenâ€™s testimony to the Senate was viewed as more hawkish than expected,â€ť Commerzbank said.
But some have sounded a note of caution about the potential implications of rising rates for Asia.
â€śGood news for the U.S. market might not necessarily benefit emerging markets,â€ť said Margaret Yang, a market analyst at CMC Markets. â€śA rising U.S. dollar and tightening U.S. monetary policy could potentially draw capital away from emerging markets,â€ť 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 worldâ€™s largest investment firms.
Elsewhere, the Hang Seng Index HSI, +1.23% gained 1.2% and Australiaâ€™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 indexâ€™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 conglomerateâ€™s de facto leader, Lee Jae-yong
Despite recent stock gainsâ€”including increases in five straight days going into Wednesday for the Shanghai Composite SHCOMP, -0.15% ; rising in 13 of the past 16 sessionsâ€”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.
â€śDespite the fact that [Trump] has been in office for three or four weeks, he hasnâ€™t really been providing a lot of the positive leads,â€ť said Pan. â€śEven 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.â€ť