Australian stocks tracked a surge in the U.S. and bonds in the region climbed after Federal Reserve Chair Janet Yellen reasserted the central bank’s gradual approach to raising interest rates. Crude oil rallied as the dollar nursed losses.
Shares in Sydney snapped a three-day decline after U.S. equities erased their losses for the year, with Yellen indicating deteriorating world growth warranted a slow approach to tightening monetary policy. While the comments ignited gains in government debt, diminishing prospects of a rate hike in the first half kept the Bloomberg Dollar Spot Index on track for its worst month since 2011. Futures on Japanese stocks were mixed amid a revival in the yen. U.S. crude oil rallied for the first time in five days, while gold retreated.
Traders reduced bets on a Fed rate hike next month to zero after Yellen dialed back some of the commentary made by other policy makers the past two weeks, emphasizing during her appearance at the Economic Club of New York that the central bank remains wary of raising rates amid threats to American growth from a slowing global economy. Financial markets have been hanging on the outlook for U.S. borrowing costs since the Fed reduced the expected pace of rate increases this year to two from four at its March gathering. Since then, some Fed officials had asserted that every meeting remains in play.
Yellen’s speech “painted a very dovish picture for the inflation outlook in 2016, and although she didn’t directly use this term, she clearly sees the U.S. economy as two-speed,” Evan Lucas, a markets strategist at IG Ltd. in Melbourne said in an e-mail to clients. “The yen now has to contend with negative rates not having the desired effect, the Bank of Japan assessing other unconventional monetary policy options and a U.S. central bank unlikely to raise rates.”
Australia’s S&P/ASX 200 Index climbed 0.5 percent as of 8:46 a.m. Tokyo time, as New Zealand’s S&P/NZX 50 Index, the first major stock gauge to start trading in the Asia-Pacific region each day, rose 0.3 percent. Futures on the Standard & Poor’s 500 Index added 0.2 percent following a 0.9 percent jump in the S&P 500 that put it back at closing levels last seen at the end of 2015.
A report on Japanese industrial output is due Wednesday along with data on coal imports and car production. The Bank of Korea’s governor will speak to reporters.
Futures on Japan’s Nikkei 225 Stock Average were bid for 17,090 in the Osaka pre-market, down from 17,100 at their close on Tuesday, while contracts traded in Singapore lost 0.5 percent to 16,975. Yen-denominated Nikkei 225 futures rose 0.3 percent on the Chicago Mercantile Exchange, climbing to 17,070.
The yen, which typically moves at odds with Japanese shares, was steady at 112.74 per dollar following a 0.7 percent bounce Tuesday that snapped its seven-day decline. The Japanese currency is headed for a 0.1 percent drop in March, after surging in February.
“Yellen just took the edge off all the other comments made in the past week or so,” said Joe Kinahan, chief strategist at TD Ameritrade Holding Corp. “All she’s doing is reinforcing that they’re not going to do something that’s unexpected. She reassured us that they’re going to follow the script.”
Futures on the Kospi index in Seoul were up 0.6 percent in most recent trading, while those on Hong Kong’s Hang Seng and Hang Seng China Enterprises indexes dropped 0.1 percent.
--With assistance from Jeremy Herron