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.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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