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Asia stocks remain cautious ahead of Yellen speech

May 27 2016 07:47

Hong Kong - Asia stocks tilted slightly upwards on Friday, but remained cautious ahead of a speech from the US central bank head and after a weak lead from Wall Street as oil pulled back below $50 a barrel.

Comments from the Group of Seven leaders Friday morning stressed the importance of global economic growth while stating the potentially disastrous economic consequences of Britain's exit from the EU.

Traders are sitting tight for clues about the prospects of an imminent US rate hike as Federal Reserve chair Janet Yellen makes a speech at Harvard University later on Friday, after recent hints of an increase in June or July from Fed officials.

"The market is off to a good start this morning. However, high valuations and the uncertainty created by Janet Yellen's speech tonight may keep buyers from getting too optimistic today," Ric Spooner, chief market analyst at CMC Markets said in a commentary.

Tokyo stocks rose 0.3% after Japanese inflation data showed prices falling in April and media reports about a consumption tax hike delay bolstered hopes of extra Bank of Japan stimulus measures.

The negative reading dealt a blow to Tokyo's faltering war on deflation, raising pressure on the BoJ to expand its vast monetary easing programme, analysts said.

But sentiment was boosted by Japanese press reports saying that Prime Minister Shinzo Abe was inclined to delay a planned sales tax hike over concerns it could damage the already fragile economy.

Elsewhere Sydney was up 0.5% while Seoul added 0.3% and Taiwan gained 0.4%.

But Hong Kong was down 0.3% while Shanghai slipped 0.2%.

Some energy firms also fell back in early trade after oil retreated from the $50 mark - a key psychological level it passed for the first time this year on Thursday in a sign the global supply glut may be easing.

At about 02:45 GMT, US benchmark West Texas Intermediate for July delivery was down 29 cents at $49.19 a barrel while Brent North Sea crude, the European standard, was 33 cents lower at $49.26.

Sydney-listed Rio Tinto dropped 2.1% and BHP Biliton eased 0.5%, while in Hong Kong CNOOC fell 0.8% and PetroChina lost 1.5%.

But in Tokyo, explorer Inpex added 3.27% and refiner JX Holdings gained 0.44%.

G7: Brexit a 'serious risk'

A final communique from the G7 leaders meanwhile emphasised economic growth as an "urgent priority" and highlighted growing international alarm over the possibility of a 'Brexit' as the UK prepares for a June 23 vote on whether to leave the EU.

"Global growth is our urgent priority," the G7 said, adding that growth remained "moderate and below potential".

"Taking into account country-specific circumstances, we commit to strengthening our economic policy responses in a cooperative manner and to employing a more forceful and balanced policy mix, in order to swiftly achieve a strong, sustainable and balanced growth pattern."

A UK exit from the 28-country bloc however, would "reverse the trend towards greater global trade and investment, and the jobs they create, and is a further serious risk to growth," leaders said.

UK Prime Minister David Cameron has been campaigning for Britain to stay in, with recent polls suggesting a widening lead for supporters of continued EU membership.

Opponents of 'Brexit' say a vote to leave the EU would spark political and economic turmoil for the region, which could spread to other parts of the world, and warn global selloffs and violent currency fluctuations could follow.

Angus Nicholson, a market analyst at IG in Melbourne, believes that a reduced risk of 'Brexit' may boost the chances of a US rate hike.

"With the risks from 'Brexit' receding before our eyes, a mid-June hike from the Fed may actually be far higher than the 29 percent probability the market is currently giving it," he said in an email.

markets  |  international markets


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