Pro-stimulus Yellen testimony cheers Asian stock markets for second day

BANGKOK – Asian stock markets were boosted for a second day Friday by the incoming Federal Reserve chief’s support for continued massive stimulus to aid the U.S. economic recovery.

Janet Yellen, who is slated to replace Ben Bernanke as Fed chief early next year, made clear Thursday that she’s prepared to stand by the central bank’s extraordinary efforts to pump up the world’s No. 1 economy when she’s chairman, if that’s what it needs.

Yellen embraced her so-called “dovish” reputation and expressed strong support for the Fed’s low interest-rate policies during a two-hour confirmation hearing before the Senate Banking Committee. She warned critics that any potential harm those policies pose are outweighed by the risk of leaving a still-weak economy to survive without them.

Her statements convinced markets that the central bank won’t reduce its $85 billion of monthly bond purchases until at least March. Previously there were expectations that the bond buying, which has kept interest rates low and sent a wave of investment into higher-yielding stocks, would be scaled back from next month.

Japan’s Nikkei 225 added 1.4 per cent to 15,081.84 as the yen weakened, trading over 100 to the dollar. Hong Kong’s Hang Seng was up 1 per cent to 22,883.23 and Seoul’s Kospi gained 1.5 per cent to 1,997.56. Australia’s S&P/ASX 200 was up 0.7 per cent to 5,390.90. Stock markets in Southeast Asia and mainland China also gained.

“The dovish tone was no surprise. Yellen indicated that it was key not to take out stimulus measures during a fragile recovery,” said analysts at Mizuho Bank in Singapore in a commentary. However, she also stressed that the extraordinary level of stimulus “cannot go on forever,” they said.

Major U.S. indexes rose to all-time highs for the second day in a row Thursday, but the gains were driven by stocks that investors tend to buy when they want to avoid risk, such as power companies, banks and drug makers.

The Dow Jones industrial average gained 54.59 points, or 0.4 per cent, to 15,876.22, while the Standard & Poor’s 500 index added 8.62 points, or 0.5 per cent, to 1,790.62. Both were record highs. The Nasdaq composite edged up 7.16 points, or 0.2 per cent, to 3,972.74.

In energy markets, benchmark U.S. crude for December delivery was up 32 cents at $94.08 a barrel in electronic trading on the New York Mercantile Exchange. The contract slipped 12 cents to $93.76 a barrel on Thursday.

The euro rose to $1.3456 from $1.3449 late Thursday. The dollar rose to 100.24 yen from 100.17 yen.