Equities climb on Yellen dovishness

Equities move higher on Yellen stimulus tailwinds

All eyes are on the confirmation hearing for Janet Yellen, who is expected to be confirmed as US Treasury Secretary. Ms Yellen, the Federal Reserve’s former head, will testify that the US risks a more prolonged recession and long-term damage to the economy if it does not inject more government spending into the economy. The prepared remarks obtained by the FT ahead of Ms Yellen’s testimony today outlined that Ms Yellen feels that with interest rates at historical lows, now is the time to “act big,” with the benefits from further spending outweighing the challenges of a larger deficit.

With Federal Reserve officials confirming their dovish bias last week, and incoming Treasury Secretary Yellen set to do the same today, Asian equity markets have jumped aboard the stimulus train this morning, sending most regional markets higher. The bullish tone has been assisted by a US headline culling overnight headline risk.

Aftermarket US index futures have rallied in Asia, with S&P 500 e-minis and Dow Jones futures climbing 0.50%, while Nasdaq futures have risen 0.75%. The gains on Wall Street have propelled Asia to a strong start, with the Nikkei 225 jumping 1.45% and the Kospi leaping 2.55% higher with the Hang Seng rallying by an impressive 2.65%.

Mainland China markets are having another circumspect day though, with investors appearing to favour Hong Kong equities at local one’s expense. The Shanghai Composite is barely changed, with the CSI 300 lower by 0.45%.

Singapore and Kuala Lumpur have risen 0.35%, with Bangkok higher by 0.95% with only Jakarta in retreat, falling 0.85% this morning. Australian markets love a stimulus narrative and have duly responded in like. The ASX 200 and All Ordinaries have rallied 1.10% today.

With Ms Yellen set to reinforce Mr Biden’s stimulus narrative at hearings today, equities should maintain a favourable tailwind in the absence of any other news.

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