Asian stocks rise on Yellen caution, Tokyo hit by yen
March 31, 2016, 12:00 am TWN
HONG KONG — Asian markets rallied and the U.S. dollar extended losses Wednesday after Federal Reserve boss Janet Yellen struck a cautious note on the global economy that lessened the prospects of an interest rate rise any time soon.
A better-than-expected reading on U.S. growth and other improved data recently had raised hopes that the global turmoil at the start of the year may have ended, and fueled talk that the central bank might consider a further tightening of borrowing costs.
However, while Yellen pointed out that the world’s top economy had “proven remarkably resilient” in the face of a global slowdown — particularly in China — and plunging oil prices, she took a dovish stance on monetary policy this year.
Job creation remains strong and other signs of growth firm, even as U.S. manufacturing industry has been hit by the strong dollar and the sharp contraction in the oil and gas industry, Yellen said.
But she added that even if the U.S. maintains a moderate growth rate, the Fed must heed “broader concerns about global financial developments,” including oil prices and the overall pace of growth.
She also rejected arguments, including from some Fed officials, that inflation has increased to the point that policymakers must raise rates sooner rather than later.
Analysts said her comments all but ended any chance of another rate rise at April’s policy meeting, while expectations for a June move were also lower.
The news put a fire under stock markets, with all three main indexes in New York rallying and the gains continuing in Asia.
Hong Kong jumped 2.2 percent and Shanghai surged 2.8 percent by the close. Sydney added 0.1 percent, Singapore rallied 1.6 percent in late trade and Seoul closed 0.4 percent higher. There were also healthy gains in Wellington, Taipei, Manila and Jakarta.
In early European trade London climbed 1.0 percent, Frankfurt gained 0.6 percent and Paris added 0.5 percent.
“For the first time in a long time, Janet Yellen speaks and markets go up,” Niv Dagan, executive director at Peak Asset Management LLC in Melbourne, told Bloomberg News. “It is clear that U.S. interest rates won’t rise any time soon.”
With the prospect of U.S. rates remaining low for some time traders moved out of the dollar, sending it tumbling against the yen, which in turn hit Japanese exporters. The Nikkei index in Tokyo ended 1.3 percent lower.
In Tokyo troubled auto parts supplier Takata plunged almost 20 percent on the Topix index after a report that it faces costs of up to US$24 billion over the recall of cars fitted with its airbags. The Topix ended 1.6 percent lower.
Key Figures around 1100 GMT
London — FTSE 100: UP 1.8 percent at 6,215.10 points
Frankfurt – DAX 30: UP 1.8 percent at 10,065
Paris — CAC-40: UP 2.0 percent at 4,453.50
EURO STOXX 50: UP 1.8 percent at 3,057.90
Tokyo — Nikkei 225: DOWN 1.3 percent at 16,878.96 (close)
Shanghai — Composite: UP 2.8 percent at 3,000.64 (close)
Hong Kong — Hang Seng: UP 2.2 percent at 20,803.39 (close)
New York — Dow: UP 0.6 percent at 17,633.11 (close)