Business

Asia stocks rise on Yellen and US debt limit optimism

  • 12 February 2014
  • From the section Business
An investor looking at stock boards
Image caption Asia stocks are set to rise after a strong performance on Wall Street

Asian stocks rose after new Federal Reserve chief Janet Yellen pledged "a great deal of continuity" in policy until the US economy improves.

Markets are also being lifted after US politicians moved to raise the country's debt limit until March 2015.

Wall Street also rallied on the news, with the S&P 500 index closing 1.1% higher, the Dow adding 1.2%, and the technology-heavy Nasdaq gaining 1%.

Japan's Nikkei 225 rose nearly 1% while Hong Kong's Hang Seng opened up 0.4%.

On Tuesday, Ms Yellen made her first public comments since taking over from former Fed chairman Ben Bernanke.

In a testimony to the US House of Representatives' Financial Services Committee, she said the US economic recovery was far from complete.

"By a number of measures our economy is not back, the labour market is not back, to normal," Ms Yellen said. "There's a great deal of slack in the labour market still."

Ms Yellen also stressed that there would be no sudden changes to US monetary policy.

"She did not disappoint the market with her reiteration of continuity," said Kelly Teoh, an analyst at IG Markets in Singapore. "That is what the market wanted to hear and the message that the US economy is on track to recovery."

The US central bank has been running a $85bn (£51.8bn) monthly bond-buying programme, known as quantitative easing, aimed at boosting the economy.

However, the Fed announced in December that it planned to scale back the stimulus programme by $10bn a month.

Debt ceiling

Investor sentiment was also lifted after the US House of Representatives passed a motion to suspend the country's debt ceiling until next year.

This came after House Speaker John Boehner backed down from previous demands for certain concessions to raise the country's borrowing authority.

The Senate will vote on the legislation as early as this week.

US Treasury Secretary Jack Lew had warned that the US would run out of the ability to borrow money later this month.

Global markets have faced significant volatility in recent years after political infighting brought the US to the brink of defaulting on its debt obligations.

The stand-off over the debt ceiling also led to the US government to shut down for more than two weeks last October.

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