Australia, NZ shares higher after Fed signals gradual policy tightening

By Rushil Dutta

July 13 (Reuters) – Australian shares recovered the previous
day’s losses on Thursday, mirroring a rise in Wall Street, after
U.S. Federal Reserve chief Janet Yellen signalled only a gradual
tightening of policy.

The S&P/ASX 200 index clawed back Wednesday’s
losses, rising 1 percent to breach the psychologically important
level of 5700 by 33.8 points. The benchmark closed at a three
week low in the previous session, falling nearly 1 percent to

The Dow rose to a record high after Yellen’s less
hawkish than expected congressional testimony was seen as a
green light for Wall Street to step up riskier trades.

Investors also welcomed a dovish Fed amid concerns over a
dip in U.S. inflation. In recent months U.S. inflation has moved
further below the Fed’s 2 percent target, even as the labour
market has strengthened.

“The Fed said it would alter its plan if weak inflation
persisted so her comments were taken as being dovish in nature
rather than hawkish,” said James McGlew, executive director of
corporate stock broking for Argonaut in Perth.

“There has been very much a hawkish theme throughout the
course of this year and the much anticipated change in direction
of interest rates upwards…is perhaps giving the Federal
Reserve reason to contemplate, to hold rates where they are for
a little bit longer.”

Aussie financials shot up 0.6 percent though their
U.S. counterparts, which tend to benefit from higher
rates, were last among sectors, closing up 0.1 percent.

Commonwealth Bank of Australia and Westpac Banking
Corp, the largest among the “Big 4” domestic banks by
market capitalisation, were among the top performers on the
benchmark, 0.8 percent and 1.5 percent higher, respectively.

Also among the top gainers was biotherapeutics firm CSL Ltd
, a sector heavyweight, which pushed the healthcare
index nearly 2 percent higher, its best intra-day
performance since mid-June.

The gold index rose 0.3 percent, after an overnight
rise in gold prices on Yellen’s testimony.

New Zealand’s benchmark S&P/NZX 50 index rose 0.4
percent, or 29.27 points, to 7,615.29 assisted by a surge in
financial and industrial stocks.

NZX Ltd was 3.5 percent higher making it the top
percentage gainer on the main index, while Auckland
International Airport was the top performer by index
weight, 1.8 percent higher.

Bucking the trend, the utilities and consumer stocks saw
small declines with entertainment firm Skycity Entertainment
Group proving the biggest drag on the benchmark 0.7
percent lower.

(Additional reporting by Christina Martin in Bengaluru; Editing
by Sam Holmes)