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Asian stocks advance after Yellen points to 2015 rate increase
[TOKYO] Asian stocks rose after Federal Reserve Chair Janet Yellen said the central bank is on track to raise interest rates this year.
"Most FOMC participants, including myself, currently anticipate that achieving these conditions will likely entail an initial increase in the federal funds rate later this year, followed by a gradual pace of tightening thereafter," Yellen said during a speech Thursday in Massachusetts. "But if the economy surprises us, our judgments about appropriate monetary policy will change." The MSCI Asia Pacific Index added 0.2 per cent to 125.11 as of 9:11 am in Tokyo. The regional benchmark measure has fallen 15 percent since the end of June, on course for its worst quarter in four years, as the Fed prepares to raise rates with financial markets rattled by concern slowing Chinese growth.
"The framework the Fed has provided is a reasonably comforting one," Shane Oliver, global strategist at AMP Capital Investors Ltd, which manages US$112 billion, said by phone. "Of course markets are unusually twitchy at the moment and that's not going to go away any time soon. The Fed will only be raising rates when they're confident growth is on a sustainable track. It's a more positive message."
Japan's Topix index added 1.1 per cent. Prime Minister Shinzo Abe unveiled a new economic growth target Thursday and vowed to halt the nation's population slide. The premier laid out three new "arrows" of his Abenomics plan: a strong economy, increased support for families with children, and social security. The Bank of Japan's main inflation gauge dropped into negative territory, data showed Friday, as weak domestic demand and plunging oil prices wiped out the impact of Governor Haruhiko Kuroda's unprecedented monetary stimulus.
New Zealand's S&P/NZX 50 Index gained 0.3 per cent and Australia's S&P/ASX 200 Index climbed 0.9 per cent. South Korea's Kospi index rose 0.2 per cent.
Slower demand from China, where growth is projected to drop below 7 per cent this year, has helped push down commodity prices, sapping already low inflation in the US. The Fed's preferred measure of prices rose 0.3 per cent in the year through July and has been under its 2 per cent target since April 2008.
Ms Yellen is resuming her planned schedule after feeling unwell toward the end of her speech, Fed spokeswoman Michelle Smith said in an e-mailed statement. The Fed chief felt dehydrated, Ms Smith said.
Futures on Hong Kong's Hang Seng Index lost 1.6 per cent and contracts on the Hang Seng China Enterprises Index of mainland firms listed in the city slid 1.8 per cent in most recent trading.
E-mini futures on the Standard & Poor's 500 Index added 0.4 per cent. The underlying gauge, which closed before Ms Yellen gave her speech, declined 0.3 per cent.