Australia Stocks Jump on Yellen's Dovish Testimony

By David Winning Features Dow Jones Newswires

Australian shares rose strongly on Thursday, mirroring other Asian-Pacific markets, after Federal Reserve Chairwoman Janet Yellen sounded dovish in her first day of Capitol Hill testimony.

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The S&P/ASX 200 index ended up 1.1% or 63 points at 5736.8 to recover all of Wednesday's losses when investors waited nervously to see what tone Ms. Yellen would adopt. Financial and healthcare shares led the way, with Westpac Banking Corp. outperforming peers after Goldman Sachs turned bullish on the stock.

Ms. Yellen, who will also give testimony to congressional committees later Thursday, said she expects the forces holding down consumer prices to fade in the months ahead, allowing the Fed to stick to plans for gradual interest-rate increases.

Among Australian financial stocks, Westpac advanced 1.9% to A$31.30 after Goldman said the impact of regulatory curbs on interest-only loans had been less than it feared. The brokerage said it was positive that restrictions on interest-only loans to less than 30% of total new lending won't apply to internal-to-bank refinancings.

"We think this interpretation of the restriction will support our current 4% system mortgage credit growth forecasts," Goldman said.

Commonwealth Bank of Australia was out of favor with Goldman, however. The brokerage dropped CBA to neutral from buy, partly because it has recently been trading at a 16% premium to Westpac when measured by price-to-earnings ratios. CBA still rose by 0.5% to A$82.56 on Thursday, reflecting the broad investor support for banking shares.

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Northern Star Resources Ltd. and Whitehaven Coal Ltd. both got a lift from quarterly production data, kicking off a slew of results by mining and resources companies over the coming days.

RBC Capital Markets said Northern Star's fourth-quarter production of 154,116 troy ounces beat its own estimate by 23%, and was due to an unexpectedly strong performance at the Jundee gold mine. Still, RBC was disappointed by Northern Star's output guidance for the current fiscal year. Northern Star rose by 2.6% to A$4.81.

Investors looked beyond Whitehaven's miss on a key coal target for the 2017 fiscal year to lift the stock 1.7% higher to A$2.92. Whitehaven said a switch in focus to a new underground coal seam at the Narrabri mine in eastern Australia meant its saleable coal production of 20.8 million metric tons fell short of an annual target of 21 million tons to 22 million tons.

The company offered an upbeat assessment of the seaborne coal market, predicting thermal coal prices will likely to remain stable for some time, as wet weather in Indonesia constrains supply and demand from Chinese power generators stays strong.

Whitehaven's gains weren't shared by other coal miners, though, with New Hope Corp. unchanged at A$1.50 and Yancoal Australia Ltd. tumbling 1.3% to A$0.38.

-Write to David Winning at david.winning@wsj.com

(END) Dow Jones Newswires

July 13, 2017 02:46 ET (06:46 GMT)