Scoreboard: Yellen comfort

Wall Street responded positively to Janet Yellen’s optimism on the US economy, while solid earnings and M&A activity also boosted sentiment.

The US Federal Reserve chair, Janet Yellen, has expressed optimism on the economy: "I am optimistic about the economy and that's reflected in the forecasts that are included in the monetary policy report." Further, she noted: "...I do think the economy is recovering and that growth is picking up and that we have sufficient growth to support continued improvement in the labour market."

In US economic data, production rose 0.2 per cent in June, short of forecasts tipping 0.4 per cent. Producer prices rose by 0.4 per cent in June, above the forecast for a 0.2 per cent gain. But the core rate (excludes food and energy) rose by 0.2 per cent as expected. Long-term capital flows into the US totalled $US19.4 billion in May.

European shares rose on Wednesday with investors comforted by firm Chinese economic data while there continued to be an easing of concerns about Portugal's banks. The FTSEurofirst 300 index rose by 1.3 per cent with the German Dax up by 1.4 per cent while the UK FTSE rose by 1.1 per cent. Australia's major miners were higher in London trade with shares in BHP Billiton up by 2.1 per cent while Rio Tinto rose by 2.8 per cent.

US sharemarkets were higher on Wednesday. Shares in Intel rose by 9.3 per cent after a solid earnings result. And shares in Time Warner rose by 17.1 per cent after Twenty-First Century Fox confirmed that it made an $80 billion offer for the rival. The Dow Jones index rose by 77 points or 0.5 per cent to record highs with the S&P 500 index up by 0.4 per cent while the Nasdaq rose by 10 points or 0.2 per cent.

US treasury prices were mixed on Wednesday as investors weighed testimony by Janet Yellen and mixed economic data. US 2 year yields were steady near 0.488 per cent while US 10 year yields were down 2 points to 2.532 per cent.

Major currencies were mixed against the US dollar in the European and US sessions on Wednesday. The euro fell from highs near $US1.3565 to $US1.3520, closing US trade near the day's lows. The Aussie dollar rose from lows near US93.30c to highs near US93.65c before ending the US session near US93.60c. And the Japanese yen held between 101.62 yen per US dollar and JPY101.79, ending US trade near JPY101.72.

World oil prices were mixed on Wednesday. Brent crude fell by US17c or 0.2 per cent to $US105.85 a barrel and the US Nymex price rose by $US1.24 a barrel or 1.2 per cent to $US101.20 a barrel. Nymex rose in response to data showing that US oil stockpiles fell by 650,000 barrels in the latest week. But the Brent price was supported by solid Chinese economic data.

Base metal prices were mixed on Wednesday but gains and losses didn't exceed 0.8 per cent. Copper fell 0.8 per cent but aluminium rose by 0.7 per cent. Gold prices rose after three days of losses with the Comex gold futures quote up by $US2.70 or 0.2 per cent to $US1,299.80 per ounce. Iron ore was unchanged at $US98.00 a tonne on Wednesday.

Ahead: Detailed job data for June is released In the US, weekly claims for unemployment insurance is released together with housing starts and the Philadelphia Federal Reserve survey.

Craig James is chief economist at Commsec.

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