* Japan, South Korea lead gains; ex-Japan Asian MSCI up 0.2
* Focus on Yellen's testimony, investors count on slow exit
from low rates
* Gold licks wounds after biggest daily fall since December
By Hideyuki Sano
TOKYO, July 15 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
Yet, with elevated prices on Wall Street and elsewhere
relying substantially on support from low interest rates, many
investors were now focusing on Federal Reserve Chair Janet
Yellen's testimony to a U.S. Senate committee.
"Markets expect her to stick to the stance that she will
guide policy by watching the pace of recovery in the job market
and the economy," said Hirokazu Kabeya, senior strategist at
European shares are expected to tick down after hefty gains
on Monday, with French shares seen dipping as much as
0.2 percent and Britain's FTSE and Germany's DAX
by 0.1 percent.
In Asia, Japan's Nikkei average rose 0.7 percent
while South Korea's Kospi gained 1.0 percent. MSCI's
broadest index of Asia-Pacific shares outside Japan
gained 0.2 percent.
Asian stock markets showed little reaction to
stronger-than-expected new loan and money supply data for China.
Chinese banks gave 1.08 trillion yuan ($173.90 billion) of new
loans in June, beating expectations of 915 billion.
The data, coming ahead of GDP and other numbers from China
due on Wednesday, underscored the perception that the Chinese
economy is stabilising after a shaky start to the year but still
needs more policy support to meet Beijing's growth target.
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.
Investors put aside concerns about euro zone banks for now,
as Portugal's biggest bank reassured investors of its stability
despite recent difficulties.
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
it 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
"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
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.
The yen showed no reaction to the BOJ's widely expected
decision to keep its policy on hold and broadly maintain its
economic forecasts, with the focus now on Governor Haruhiko
Kuroda's upcoming news conference.
Elsewhere, U.S. crude oil futures hit a nine-week low
of $100.22 per barrel on Monday on signs of improving supply
from key producers but renewed violence in Libya prompted a
rebound to around $101.
(Editing by Eric Meijer and Alan Raybould)