Talking Points

  • Asian stocks rose, applauding what markets see as a mildly less hawkish Federal Reserve Chair
  • Chinese trade data topped forecasts in June
  • A weaker US Dollar saw the Nikkei close up by only a whisker

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Most Asian markets gained Thursday as investors mulled Federal Reserve Chair Janet Yellen’s Congressional testimony of the previous day.

She said that the central bank would proceed with the unwinding of its vast balance sheet this year, but with close attention paid to inflation data. Her sense that it was “premature” to determine whether the economy was headed for a 2% inflation rate was interpreted by some investors as a little more dovish (or at least less hawkish) than she has been of late. Treasury yields slipped a little in the aftermath.

Asian equity investors broadly liked what they heard, as had their US counterparts. However a weaker US Dollar made things tough for the Nikkei, whose financial stocks also struggled. It ended up, but only by 0.01%. Australia’s ASX did better, rising 1.11%, and all major Asian bourses were green into the close. South Korea’s Kospi made a new record high.

China’s June trade numbers came in well above expectations with exports up 11.3% and imports 17.2% higher, both looking very solid. The Australian and New Zealand Dollars made gains on their US cousin, and didn’t react noticeably to local data- elevated inflation expectations in the Aussie’s case and lower but still upbeat consumer confidence in the Kiwi’s. The Canadian Dollar gained further on its home central bank’s Wednesday rate increase.

Crude oil prices pared Wednesday’s gains as large inventory drawdowns were offset by US production gains. Gold prices have continued to rally from Monday’s lows.

The rest of the session offers plentiful economic news, notably initial US jobless claims, Canadian new home prices and the Bank of England’s look at credit conditions. The Federal Reserve’s Lael Brainard and Chicago Fed President Charles Evans are also due to speak. However, Janet Yellen is back on Capitol Hill, this time before the Senate Banking Committee, and that meeting is likely to dominate market proceedings.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX