Asian stocks higher on Yellen testimony

Asian equities edge higher on stimulus story

Incoming Treasury Secretary Janet Yellen made all the right noises as far as Wall Street was concerned at her confirmation hearing overnight.

Wall Street responded overnight with a thumbs-up, buying equities and selling the US dollar. They wanted to hear more stimulus, and Ms Yellen delivered 1.9 trillion reasons on that front. The financial markets chose to ignore what they didn’t want to hear. Namely, Yellen’s remarks that taxes would rise on corporations and the rich, and that a repairing of relations with China was off the table. Ms Yellen mentioned China’s trade practices and the incoming Biden administration has signalled that the China tariffs will remain in place.

The USD 1.9 trillion stimulus story was music to the ears of the FOMO crowd, and Wall Street responded in kind, propelling US equities higher. The S&P 500 rose 0.81%, the Nasdaq got Netflix-boosted by 1.53%, and the Dow Jones lumbered 0.38% higher, with index futures on all three edging higher today in Asia.

After a rocky start, Asian equities are staying on message and following Wall Street higher. The exception is Japan, where the Nikkei 225 has fallen 0.45% ahead of the BOJ decision tomorrow. The Kospi has now crawled to a 0.20% gain on the day. Mainland China markets have shrugged of Covid-19 restrictions and the Yellen comments on trade overnight. The Shanghai Composite is 0.40% higher, with the CSI 300 rising 0.50% and Hong Kong is up 0.30%.

Regionally, Taipei is 0.10% higher, with trade-sensitive Singapore down 0.30% and Kuala Lumpur climbing 0.55% ahead of an expected Bank Negara rate cut. Bangkok is 0.90% higher as government stimulus is distributed, while Manila has retreated 0.70% and Jakarta remains unchanged. In Australia, US stimulus talk, and lofty natural gas and iron ore prices have lifted local markets. The ASX 200 is up 0.50% and the All Ordinaries are climbing 0.60%.

Until the US Senate Republicans reveal their hand, US stimulus talk and dovishly unchanged central bank decisions around the world should continue to support equity prices.

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