Talking Points:
- Asian shares tracked Wall Street higher
- Investors don’t seem at all worried about the prospect of higher US rates, perhaps quite soon
- Fed Chair Yellen will probably keep their attention through Wednesday’s global session
Asian shares were mostly higher on Wednesday, enthused as were their New York cousins the day before by comments from Federal Reserve Chair Janet Yellen.
In testimony to the Senate Banking Committee, Yellen cautioned against leaving interest rates too low for too long. Her remarks have been interpreted by markets as leaving the door to a March rate increase wide open, although of course the Fed never pre-commits. US markets took her words well. Yes, she was “hawkish” on interest rates, but perhaps no more so than markets had expected. In any case the S&P 500 posted a fifteenth record closing high since the US presidential election on November 8.
With that sort of tailwind Asians stocks were always likely to be set fair, and so it proved. The Nikkei added 1.2%, with mainland Chinese and Hong Kong stocks all higher. Australia’s ASX 200 added more than 1%, helped by news that Australian consumer confidence rose sharply in January.
The Nikkei’s gains were perhaps the most heroic. They came against falls of more than 10% for index member Toshiba. That weakness showed after reports that the company expects a US$6.3 billion loss from its US nuclear unit, and will sell more of its top-line flash-memory chip operation to raise urgently needed funds.
The US Dollar posted gains against most major rivals, and may go further as Yellen’s testimony continues on Wednesday in Washington. Crude oil prices took a modest knock, reportedly on fears that current apparently high levels of compliance with production cuts in major producing nations won’t be maintained. Brent futures shed about 20 cents.
Gold prices edged lower as Yellen’s comments sank in (higher US rates tend to hurt non-yielding gold). However, it clawed back some ground through the Asian session to trade up around 0.1%.
Apart from Ms. Yellen, the session is rich in economic data from both sides of the Atlantic. Investors can look forward to UK employment statistics, European trade data and heavyweight retail and consumer price index numbers out of the US. Oil wonks can also anticipate inventory data out of Cushing, Oklahoma.
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--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
