Asia report: Markets mostly higher after Powell testimony

Markets in Asia mostly finished in the green on Thursday, as investors reacted to a suggestion from Federal Reserve chair Jerome Powell that the US central bank could still be cutting interest rates in the near future.

In Japan, the Nikkei 225 was up 0.51% at 21,643.53, as the yen strengthened 0.29% against the dollar to last trade at JPY 108.14.

Of the major components on the benchmark index, automation specialist Fanuc was up 0.05%, fashion firm Fast Retailing rose 1.15%, and technology conglomerate SoftBank Group added 1.14%.

Video games giant Nintendo saw its shares surge 4.15%, a day after it announced a more budget version of its hugely popular Switch gaming console.

The broader Topix index was ahead 0.47% to finish up its session at 1,578.63.

On the mainland, the Shanghai Composite eked out gains of 0.08% to 2,917.76, and the smaller, technology-heavy Shenzhen Composite slid 0.13% to 1,548.92.

South Korea’s Kospi was 1.06% higher at 2,080.58, while the Hang Seng Index in Hong Kong was 0.81% higher at 28,431.80.

Both of the blue-chip technology stocks were higher in Seoul, with Samsung Electronics up 1.43%, and chipmaker SK Hynix ahead 3.57%.

Regional tensions continued to simmer between Japan and South Korea, with Seoul announcing that it would allocate KRW 300bn to deal with export restrictions implemented by Tokyo.

Last week, Japan’s administration said it would tighten restrictions on the export of materials used by Korean firms to make silicon chips and smartphone screens, as the two countries continued their dispute over Koreans being forced to work for Japan-owned companies during the Second World War.

Investors also looked across the Pacific Ocean, after Federal Reserve chair Jerome Powell told the House Financial Services Committee that business investments had slowed “notably” across the country in recent months amid ongoing uncertainties.

“Many FOMC participants saw that the case for a somewhat more accommodative monetary policy had strengthened,” Powell said in his semi-annual testimony.

“Since then, based on incoming data and other developments, it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the US economic outlook.”

That led to a number of market watchers stating it had become clearer that a rate cut was on the cards, though it was more likely to be 25 basis points, rather than the 50 basis points predicted before last week’s surprisingly positive nonfarm payrolls data.

“In the wake of Powell’s first day of testimony, the market sees a 25-basis-point cut as largely granted,” said London Capital Group senior market analyst Ipek Ozkardeskaya.

“On top, the activity on the US treasury markets suggests that there are 25% chances for a 50-basis-point cut by the end of this month … up from nearly 5% before Powell’s speech.

“And indeed, if Powell chose to deliver a dovish testimony on top of what has been already priced in by the markets, then he could pull out more of his hat at the July meeting.”

Oil prices were higher as the region went to bed, with Brent crude last up 0.56% at $67.39 per barrel, and West Texas Intermediate also rising 0.56% to $60.77.

In Australia, the S&P/ASX 200 managed gains of 0.39% to close its trading day at 6,716.10, with most sectors finishing in the green.

It was a mixed day for the country’s big four banks, with Australia and New Zealand Banking Group down 0.76%, Commonwealth Bank of Australia flat, National Australia Bank up 0.97%, and Westpac Banking Corporation ahead 0.39%.

The country’s banking sector was thrust back to the top of the agenda on Thursday, after the Australian Securities and Investments Commission threatened to prosecute a number of large lenders over what it described as harmful consumer insurance products.

Australia and New Zealand Banking Group, Citigroup, Commonwealth Bank of Australia and eight more lenders were said to have sold products that were “extremely poor value for money”, which “caused consumers harm”.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 was up 0.3% at 10,687.32, led higher by specialist dairy producer Synlait Milk, which was ahead 4%.

Both of the down under dollars were stronger on the greenback, with the Aussie last ahead 0.28% at AUD 1.4328, and the Kiwi advancing 0.4% to NZD 1.4988.