Asian shares gain, count on Fed’s support
By Hideyuki Sano
TOKYO (Reuters) – Asian shares rose on Tuesday after Citigroup's earnings and a fresh round of merger and acquisition activity in the U.S. healthcare sector lifted global stock prices.
U.S. stocks ended higher on Monday, with the Dow Jones industrial average hitting an intraday record, helped by Citigroup's better-than-expected earnings and more deals in the healthcare sector.
Portuguese 10-year bond yields fell to 3.83 percent, retreating further from a six-week high above 4 percent hit last week after disclosures of financial problems at a web of family-held holding companies behind Banco Espirito Santo.
Gold licked its wounds after the biggest fall in 7-1/2 months on Monday as the fading fears over Portugal's banking sector and a gain in U.S. equities prompted investors to take profits after bullion's rally to 3-1/2 month highs last week. It traded at $1,306.80 per ounce, having fallen as low as $1,302.90 on Monday.
As risk appetite returned, the 10-year U.S. Treasury yield rose back to 2.541 percent from a five-week low of 2.494 percent last week.
U.S. bond yields have been kept low as the Fed has signalled its plans to keep interest rates around zero even after it finishes tapering its stimulus programme.
Yellen's testimony gives bond traders a chance to look for clues on when and how the Fed plans to raise interest rates, after the minutes of the Fed's last meeting showed policymakers discussed exit strategies from its ultra-loose policy.
A shift in the U.S. rate outlook could have a big impact on asset prices.
"While Yellen dismissed the recent rise in inflation as 'noise', our economists believe that inflationary pressures are building in a sustainable fashion and investors may be forced to start pricing in a more aggressive pace of hikes later this year," Sreekala Kochugovindan, an analyst at Barclays, wrote in a report.
Major currencies hardly budged ahead of Yellen's comments. The euro stood at $1.3620 and the yen changed hands at 101.55 to the dollar, both stuck in their recent ranges.