Equity gains spread through Asia, dollar weakens

Sydney - Asian equities and currencies advanced with government bonds after Janet Yellen signalled the Federal Reserve won’t rush to tighten monetary policy.

The dollar weakened for a fourth straight day, with a gauge of the currency hitting a 10-month low.

Standout stock markets included Seoul’s Kospi Index at a record high and Hong Kong’s Hang Seng Index at the strongest in two years, after the Dow Jones Industrial Average closed at an all-time high.

South Korea’s central bank held its benchmark rate, as expected, while Chinese exports grew more than forecast as global demand proved resilient.

Australian sovereign debt followed gains in Treasuries after Yellen expressed confidence in the US economy and signalled monetary tightening would be gradual. Oil held above $45 a barrel. Canada’s dollar gained after the first rate hike there in seven years.

"The market is upbeat as Yellen’s comments suggest a slower pace of rate increases and that bodes well for liquidity conditions and stocks," said Banny Lam, head of research at CEB International Investment in Hong Kong.

Yellen’s testimony diverted attention from Donald Trump Jr.’s emails about his meeting with a Russian lawyer, though concern remains that the latest saga in Washington may waylay efforts to reform taxes and boost spending.

The Fed chair’s gradualist tone on policy came after signals from central banks around the world that accommodative policies may no longer be needed as the global economy strengthens.

Here’s what investors are watching:

Yellen will continue testifying on Thursday. US CPI reading is due on Friday. JPMorgan Chase, Citigroup and Wells Fargo & Co. report results this week. The UK is due to publish its Repeal Bill on EU membership this week.

China’s exports rose 11.3% in June, up from 8.7% in May and beating forecasts for 8.9% growth. Imports rose 17.2%.

These are the main moves in markets:

Stocks

Hong Kong’s Hang Seng Index climbed 1.1% to its highest since July 2015 as of 1:00 p.m. local time. A gauge of Chinese companies listed in Hong Kong jumped 1.5%, while the Shanghai Composite Index gained 0.4%.

Japan’s Topix index fluctuated and was last up 0.1%. Australia’s S&P/ASX 200 Index strengthened 1.1%, the most since July 4. South Korea’s Kospi Index climbed 1.2%.

Futures on the S&P 500 were up 0.1%. The underlying gauge advanced on Wednesday to just 0.4% shy of its closing record. The Dow Jones Industrial Average rose 123 points to a record 21 532.

Currencies

The yen strengthened 0.1% to 113.06 per dollar, after climbing 0.7% on Wednesday in its biggest gain for more than a month. The Korean won rose 0.8%, the most since May 25, to 1 136.80 per dollar.

The US dollar was down against all G-10 peers. The Bloomberg Dollar Spot Index fell 0.1% to its lowest since September 2016. The gauge has lost 0.7% this week.

The Canadian dollar rose 0.1% after jumping 1.3% on Wednesday. The pound rose 0.1% and the euro was up 0.2%. The Brazilian real gained 1.4% on Wednesday after former President Luiz Inacio Lula da Silva was convicted of graft and money-laundering.

The Mexican peso rose 0.1%.

Commodities

Wheat for September delivery on the Chicago Board of Trade dropped 1.4% to $5.29 a bushel, down a second day. The US Department of Agriculture said domestic production will be greater than analysts expected.

West Texas Intermediate crude was steady at $45.50 a barrel. It climbed 1% the previous session after data showed crude inventories fell 7.56 million barrels last week.

Gold added 0.2% to $1 223.31 an ounce, a fourth day of gains.

Rates

The 10-year US Treasury yield slid for a fourth day, down one basis point to 2.31%. The yield on Australian government notes with a similar maturity dropped three basis points to 2.695%.

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