Australia, NZ shares higher after Fed signals gradual policy tightening

[BENGALURU] Australian shares recovered the previous day's losses on Thursday, mirroring a rise in Wall Street, after US Federal Reserve chief Janet Yellen signalled only a gradual tightening of policy.

The S&P/ASX 200 index clawed back Wednesday's losses, rising 1 per cent to breach the psychologically important level of 5700 by 33.8 points. The benchmark closed at a three week low in the previous session, falling nearly 1 per cent to 5,673.8.

The Dow rose to a record high after Yellen's less hawkish than expected congressional testimony was seen as a green light for Wall Street to step up riskier trades.

Investors also welcomed a dovish Fed amid concerns over a dip in US inflation. In recent months US inflation has moved further below the Fed's 2 per cent target, even as the labour market has strengthened.

"The Fed said it would alter its plan if weak inflation persisted so her comments were taken as being dovish in nature rather than hawkish," said James McGlew, executive director of corporate stock broking for Argonaut in Perth. "There has been very much a hawkish theme throughout the course of this year and the much anticipated change in direction of interest rates upwards...is perhaps giving the Federal Reserve reason to contemplate, to hold rates where they are for a little bit longer."

Aussie financials shot up 0.6 per cent though their US counterparts, which tend to benefit from higher rates, were last among sectors, closing up 0.1 per cent.

Commonwealth Bank of Australia and Westpac Banking Corp, the largest among the "Big 4" domestic banks by market capitalisation, were among the top performers on the benchmark, 0.8 per cent and 1.5 per cent higher, respectively.

Also among the top gainers was biotherapeutics firm CSL Ltd , a sector heavyweight, which pushed the healthcare index nearly 2 per cent higher, its best intra-day performance since mid-June.

The gold index rose 0.3 per cent, after an overnight rise in gold prices on Yellen's testimony.

New Zealand's benchmark S&P/NZX 50 index rose 0.4 per cent, or 29.27 points, to 7,615.29 assisted by a surge in financial and industrial stocks.

NZX Ltd was 3.5 per cent higher making it the top per centage gainer on the main index, while Auckland International Airport was the top performer by index weight, 1.8 per cent higher.

Bucking the trend, the utilities and consumer stocks saw small declines with entertainment firm Skycity Entertainment Group proving the biggest drag on the benchmark 0.7 per cent lower.

REUTERS