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Asian Stock Markets: https://tmsnrt.rs/2zpUAr4
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Nikkei climbs 1.3% to new 33-year high, US futures rise
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The dollar remains elevated, hitting a 6-month high against the yen
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Cash treasuries closed, oil prices rise
By Stella Qiu
SYDNEY, May 29 (Reuters) – Asian stocks and US stock futures rose on Monday thanks to a weekend deal by US President Joe Biden and House Speaker Kevin McCarthy to suspend the government’s debt ceiling, ending a protracted standoff and the brought some relief to investors.
After weeks of negotiations, Republican Congressmen McCarthy and Biden forged a deal late Saturday to avert an economically destabilizing default and suspend the $31.4 trillion debt ceiling through 2025. The agreement must now be passed by the tightly divided Congress.
The upbeat news pushed S&P 500 futures in Asia up 0.2%, while Nasdaq futures rose 0.4%.
MSCI’s broadest index of Asia-Pacific stocks outside of Japan gained 0.3% after falling 1.1% the previous week. Tokyo’s Nikkei rose 1.3% to a new 33-year high.
In the opposite direction, Chinese blue chips are down 0.1%, while Hong Kong’s Hang Seng Index is down 0.3%. It was weighed down by Chinese industrials earnings data over the weekend, which reinforced growing signs of a loss of momentum in the world’s second largest economy.
“There may be an initial glimmer of relief that could push yields down a bit along with a slight rise in the US dollar along with equities. But the uncertainties of getting the deal through Congress may dampen[optimism],” said Vishnu Varathan, head of economics at Mizuho Bank in Singapore.
“Moreover, the overall impact on the liquidity crunch from issuance to supplement Treasury’s very tight cash balance could perversely boost yields and weigh on share prices. However, the dollar could be targeted.”
Cash US Treasuries were flat on Monday due to the Memorial Day holiday in Asia, while futures were broadly flat. Two-year bond yields hit a 2-1/2-month high of 4.6390% on Friday as markets bet that Federal Reserve interest rates will last longer.
The story goes on
US stocks rallied late last week on hopes of a debt ceiling deal and optimism over artificial intelligence. The Dow Jones Industrial Average ended a five-day losing streak on Friday, while the Nasdaq Composite Index and S&P 500 closed at their highest levels since August 2022.
“We always thought there would be a solution and now we have it, so some of the uncertainty for the markets is gone. But when we’re over that, when the votes are taken and when we come back from Memorial Day, the question becomes, “What’s next?” said Tony Sycamore, a market analyst at IG.
“Yes, we will see a recovery rally in the near term, but then we need to start thinking about the June FOMC meeting, about inflation being more persistent than expected and money being pulled from markets.”
The Federal Reserve’s favorite indicator of inflation — the Personal Consumption Expenditure (PCE) Index — came in stronger than expected on Friday. Coupled with strong consumer spending in the US, markets are now biased towards a quarter point rate hike by the Fed next month and expect rates to remain at that level for the remainder of the year.
More US economic data, such as job vacancies and nonfarm payrolls numbers, will become available in the coming week and could influence Fed deliberations on the June decision. Economists polled by Reuters said the number of people employed is expected to have risen by 195,000 in May, down from 253,000 in the previous month.
In Turkey, the lira traded at 20.04 against the dollar, just above a record low of 20.06 hit on Friday, after President Tayyip Erdogan secured victory in the country’s presidential election, bringing his increasingly authoritarian rule into a third decade extended.
Elsewhere, the dollar index — a measure of the dollar against its main peers — was slightly lower at 104.17 as risk-sensitive currencies rallied. However, it is still not far from a two-month high set on Friday.
The yen fell to a fresh six-month low of $140.89 per dollar in early trade, the euro posted losses around a two-month low of $1.0727 and the Aussie climbed 0.3% to $0.6535 and tried to break away from its six-month low on Friday.
Oil prices rebounded early Monday. Brent crude futures were up 0.7% to $77.51 a barrel, while US West Texas Intermediate crude was up 1% at $73.4 a barrel.
Gold prices fell 0.2% to $1,943.19 an ounce.
(Reporting by Stella Qiu and Tom Westbrook; Editing by Shri Navaratnam)
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