Asia: Stocks advance as yen lifts Topix, commodity shares rally

[SINGAPORE] Asian stocks rose as the weaker yen boosted Japanese exporters and commodity shares rallied after Federal Reserve Chair Janet Yellen signaled the US economy is strengthening enough to withstand gradual increases in borrowing costs.

The MSCI Asia Pacific Index climbed for a third day to extend a five-week high, advancing 0.4 per cent to 130.45 as of 9:16 am in Tokyo. The US dollar rose the most in three weeks against the yen as Yellen said the positives in the US economy outweigh the negatives, and reaffirmed an outlook of gradual interest-rate increases.

"The normalisation program from the Fed is going to be somewhat more gradual than anticipated," Ric Spooner, chief analyst at CMC Markets in Sydney, said by phone.

"It seems likely that we will get at most one rate hike this year and that's positive for equities and commodities. Of the beaten-down commodities, the oil market is the best place. We're already seeing supply cutbacks."

Shares in the US on Monday rose to the highest in seven months and within one per cent of an all-time high as investor anxiety about the strength of the US economy eased following Ms Yellen's speech, which also omitted any reference of when the Fed may look to raise interest rates.

Futures traders lowered the possibility of a hike by July to 21 per cent after her speech from 27 per cent. Chances of a hike in September rose slightly to 42 per cent.

Investors are turning their focus to central banks, with policy decisions scheduled from the Fed and the Bank of Japan next week. Central banks in Australia and India are due to announce monetary policy decisions Tuesday, while Taiwan and the Philippines release inflation data.

Raw-material and energy shares climbed the most on Tuesday. The four-year bear market that pushed commodities to the lowest level in a quarter century came to end as supply constraints drive a recovery in everything from soybeans to zinc.

The Bloomberg commodity gauge, which measures returns on raw materials rose 1.1 per cent Monday to push its rally from a January low past 20 per cent to meet the definition of a bull market.

Japan's Topix index rose 0.4 per cent after the yen slipped one per cent against the US dollar on Monday. Australia's S&P/ASX 200 Index added 0.3 per cent.

South Korea's Kospi Index climbed 0.7 per cent, while New Zealand's S&P/NZX 50 Index was little changed as both markets reopen following yesterday's holiday.

Futures in China and Hong Kong point to a higher open, with the FTSE China A50 Index rising 0.4 per cent in their most recent trading, while those on the Hang Seng Index climbed 0.8 per cent.

Chinese stocks fell on Monday for the first time in three days, led by brokerages and consumer-staples companies, before the release of data this week that will likely show the world's second-biggest economy failing to sustain growth momentum. The Shanghai Composite Index slid 0.2 per cent at the close.

Futures on the S&P 500 Index were unchanged. The US equity benchmark index gained 0.5 per cent on Monday to close at a seven-month high.

BLOOMBERG