Asian stocks rise on US-China thaw optimism: markets close

(Bloomberg) – U.S. and European stock futures were steady as investors waited for possible progress on debt ceiling negotiations, while Asian stocks rose after President Joe Biden said ties with China would be tightening “very soon.” would improve.

Most Read by Bloomberg

Hong Kong stocks led gains in Asia, with the Hang Seng Index gaining more than 1%, driven by technology companies. Historically cheap valuations after consecutive weekly declines provided further support. The regional rally also saw Japanese, South Korean and mainland China stocks rise, but Australian blue chips were left behind.

“I think that’s going to thaw out very soon,” Biden said in comments Sunday after a Group of Seven summit in Japan on US-China relations. He added that his government is considering lifting sanctions on Chinese Defense Minister Li Shangfu.

Traders also remain fixated on the path of the Fed’s interest rate hike, with bets on a rate hike reduced to 25% in June as Jerome Powell signaled a pause. Minneapolis Fed President Neel Kashkari also said he might favor a pause, Dow Jones reported.

“Market prices are once again firmly convinced that the Fed will pause,” Chris Weston, head of research at Pepperstone Group Ltd., wrote in a research note. “The US debt ceiling and US bank price developments will dominate the narrative.”

South Korea’s Kospi is up as much as 1%, on course for its sixth daily gain. Samsung Electronics Co. and SK Hynix Inc. were among the biggest contributors to the benchmark after China said its US rival Micron Technology Inc. failed a cybersecurity audit.

The South Korean won led gains among emerging market currencies, while the offshore yuan weakened. The dollar exchange rate was hardly changed. Government bonds made small gains.

The story goes on

debt talks

President Biden and House Speaker Kevin McCarthy are scheduled to meet in Washington Monday after the two had a “productive” phone call over the weekend. Still, a Republican negotiator is insisting on a multi-year spending cap, complicating talks despite the possibility of a default as soon as June 1.

Even if the debt ceiling is more than a week away, the actual deadline for a deal may be much sooner. That’s because lawmakers must pass whatever Biden and McCarthy can agree on, and that process can take several days.

McCarthy said last week that the House of Representatives must vote on a compromise plan this week to meet the June 1 deadline. The Senate would then consider the law before it went to Biden’s desk for signing.

UBS strategists say stocks are likely to fall if the US fails to raise the debt ceiling and delay government payments. Although unlikely, the S&P 500 will fall as much as 20% towards 3,400 if the US officially defaults and delays all payments beyond principal for a week, Jonathan Pingle’s team said.

Meanwhile, in India, shorter-dated bonds rallied on bets that the withdrawal of the country’s highest denomination notes would leave banks with excess cash to invest.

Iron ore fell on uncertainty over demand from China. Oil prices continued their two-day decline and gold was slightly down after gaining 1% on Friday. Bitcoin fell and stayed below $27,000.

Important events this week:

• Eurozone Consumer Confidence, Monday

• James Bullard, Raphael Bostic and Thomas Barkin will speak as Fed Presidents on Monday

• Eurozone S&P Global Eurozone Manufacturing & Services PMI, Tuesday

• US new home sales, Tuesday

• Dallas Fed President Lorie Logan speaks Tuesday

• The Fed will release minutes of its March 2-3 monetary policy meeting on Wednesday. May

• Bank of England Governor Andrew Bailey speaks on Wednesday

• US Initial Jobless Claims, GDP, Thursday

• Rate decisions in Turkey, South Africa, Indonesia, South Korea Thursday

• Tokyo CPI, Friday

• US Consumer Income, Wholesale Inventories, Durable Staples, University of Michigan Consumer Sentiment, Friday

Some of the key movements in the markets:

Shares

• S&P 500 futures were little changed as of 7:06 am London time. The S&P 500 fell 0.1% on Friday

• Nasdaq 100 futures were little changed. The Nasdaq 100 fell 0.2% on Friday.

• Japan’s Topix rose 0.7%

• Australia’s S&P/ASX 200 fell 0.2%

• Hong Kong’s Hang Seng rose 1.4%

• The Shanghai Composite rose 0.3%

• The Euro Stoxx 50 futures have hardly changed

currencies

• The Bloomberg Dollar Spot Index is little changed

• The euro was little changed at $1.0815

• The Japanese yen was little changed at 138.00 per dollar

• The offshore yuan fell 0.1% to 7.0345 per dollar

• The Australian dollar fell 0.2% to $0.6639

• The British pound was little changed at $1.2443

cryptocurrencies

• Bitcoin fell 0.3% to $26,782.31

• Ether is little changed at $1,804.8

Bind

• The 10-year government bond yield was little changed at 3.67%

• Japan’s 10-year yield fell two basis points to 0.38%

• Australia’s 10-year yield was little changed at 3.59%

raw materials

• West Texas Intermediate Crude fell 0.8% to $70.96 a barrel

• Spot gold fell 0.2% to $1,973.15 an ounce

This story was created with the support of Bloomberg Automation.

– With the support of Rita Nazareth and Tassia Sipahutar.

Most Read by Bloomberg Businessweek

©2023 Bloomberg LP