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

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. Fragile growth prospects in Europe dampened markets there.

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 2 per cent to 15,165.92 as the yen weakened, trading over 100 to the dollar. Hong Kong’s Hang Seng shot up 1.7 per cent to 23,032.15 and Seoul’s Kospi jumped 1.9 per cent to 2,005.64. Australia’s S&P/ASX 200 rose 0.9 per cent to 5,401.70. 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.

Futures augured further gains on Wall Street after new highs were set Thursday. S&P 500 and Dow futures were both up 0.1 per cent.

In Europe, France’s CAC-40 shed 0.2 per cent to 4,275.91 and Britain’s FTSE 100 was little changed. Germany’s DAX dropped 0.1 per cent to 9,143.47.

The region faces a long slog back from its five-year economic crisis and official figures on Thursday showed that the euro currency bloc’s economy barely grew at all in the July through September period.

In energy markets, benchmark U.S. crude for December delivery was up 13 cents at $93.90 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 $1.3455 from $1.3449 late Thursday. The dollar rose to 100.32 yen from 100.17 yen.

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