Asia report: Most markets rise on Yellen dovishness

Most markets in Asia rose on Wednesday, taking their cue from the US markets overnight, which were encouraged by a particularly dovish tone from Federal Reserve chair Janet Yellen in a scheduled speech on Tuesday.

Japan lagged, however, with the Nikkei 225 closing down 1.31% to 16,878.96. A weaker US dollar, after Yellen’s remarks, helped the yen strengthen. It was last trading 0.47% closer to the greenback at JPY 112.17.

That led the major exporters lower, with Toyota losing 2.5%, Honda down 3.62% and Nissan shedding 3.7%.

Shares in electronics maker Sharp were up by 3.85%, after the Yomiuri reported Hon Hai Precision Industries, which was set to acquire the Japanese firm, had plans to overhaul management - including replacing the CEO.

Data released before the open in Tokyo showed Japan’s industrial output was down 6.2% in February, following a 3.7% gain in January. Reuters-polled expectations were for a 6% decline.

In Korea, the Kospi ended the day up 0.36% at 2,002.14, while Hong Kong’s Hang Seng Index finished up 2.15% to 20,803.39.

Chinese markets were also up, with the Shanghai Composite Index adding 2.76% at 3,000.30 and the Shenzhen Composite Index rising 3.6% at 1,906.76.

Before the open, the People’s Bank pegged renminbi stronger at CNY 6.4841 per dollar, compared with 6.5065 previously. The onshore yuan can trade 2% either side of the peg.

In prepared remarks overnight, Yellen said the Fed should proceed with caution in adjusting monetary policy, and agreed economic and financial conditions could be seen as worse off now than in December.

She also noted the mixed economic readings coming out of the US since the start of the year, and said the best policy was greater gradualism, though a rate hike could go ahead if the economy grew faster.

Julius Baer head of Asia research Mark Matthews said Yellen "doubled down" on dovishness in her speech.

"She totally contradicted the four Fed presidents who spoke last week, and any chance of the April rate hike suggested by them is over,” he noted.

Oil prices rose during Asian trading, and Brent crude was last up 1.68% at $39.81 per barrel, with West Texas Intermediate adding 1.85% at $39.00.

A selloff in oil overnight was thought to be triggered by a decision between Kuwait and Saudi Arabia to resume production at the joint venture Khafji field, at a time when production was meant to be frozen. Khafji produced 300,000 barrels of oil per day..

Down under, the S&P/ASX 200 pared back earlier gains, but still closed 0.11% above the waterline at 5,010.26.

After a Tuesday of tumbles, Australasian banking stocks were mixed in Sydney. Australia and New Zealand Banking Group was down 0.39% and Westpac lost 0.12%, while National Australia Bank was broadly flat and Commonwealth Bank of Australia finished up 0.26%.

Airline Virgin Australia slid 9.33% after reports that its largest shareholder, Air New Zealand, was considering a sale of its 25.9% stake in the airline.

Wellington was the scene of another fresh record high on Wednesday, with the S&P/NZX 50 rising 0.6% to 6,714.16. Retirement housing operator Metlifecare led the index, rising 4.4% to a price not seen since February 2008.

Air New Zealand also rose by 0.35% after the news it was looking to dispose of its Virgin Australia holding. Chief executive Christopher Luxon abruptly quit Virgin’s board on Wednesday, effective immediately, and the airline was said to be in talks with Credit Suisse over its options.

The airline - majority state-owned - had sunk NZD 442m into Virgin Australia and recently loaned it NZD 145m, though the Australian carrier had made consistent losses.

In currencies, the Aussie dollar moved closer to the greenback, and was last 0.43% stronger at AUD 1.3052. The Kiwi also made a sharp advance, gaining 0.99% on its American counterpart to NZD 1.4452.