(Bloomberg) – Japanese equities extended gains after better-than-expected economic growth fueled further optimism about the country’s stock outlook. Stock indices elsewhere in the region were mixed.
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Japan’s benchmark indices rose at the open after the Topix index closed at its highest level in 33 years on Tuesday. Wall Street strategists pointed to the country’s corporate reforms and loose monetary policy as reasons for continued optimism.
Investors in the country received a further boost after gross domestic product grew at the fastest pace in three quarters as further easing of pandemic regulations boosted consumption, a positive result that is likely to fuel speculation about a possible change in central bank policy.
The Japanese stock market has the potential to become a politically driven, sustained bull market, said Bruce Kirk, chief strategist for Japanese equities at Goldman Sachs Group Inc. in Tokyo. “In the early stages, at least for overseas purchases, you’re going to really focus on a fairly limited number of companies,” he told Bloomberg Television.
Stocks rose in South Korea and fell in Australia, where investors awaited payroll data that could hint at further tightening by the Reserve Bank of Australia.
US stock futures edged higher in Asia after the Nasdaq 100 closed up just 0.1% and the broader S&P fell after a rapid decline in the closing minutes of the session. President Joe Biden and House Speaker Kevin McCarthy expressed their confidence when asked if an agreement on the debt ceiling could be reached within days to end a stalemate ahead of a possible US default.
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Distorted bills
According to Andrew Hollenhorst, chief US economist at Citigroup Inc., for now, the market impact of the debt ceiling concerns is largely limited to distorted government bond yields, with bonds maturing in early June trading at higher yields.
“If an agreement to raise the debt ceiling is reached, the Treasury will seek to rebuild its treasury quickly,” he wrote in a note. “That means significant issuance of T-bills and an outflow of private liquidity as cash currently held in bank reserves and the Fed’s reverse repo program flow into the Treasury Department’s cash account.”
Both government bonds and the dollar were little changed in early Asian trade. That came after US Treasuries fell across the curve on Tuesday and the 30-year Treasury yield rose to 3.90% – the highest since the run-up to the banking turmoil that erupted in early March.
New Zealand bond yields rose faster than the government budget, which is expected to show rising debt and larger deficits. Australian bonds also fell.
Fed talks
Richmond Federal Reserve Chairman Thomas Barkin said he still wanted to be confident that inflation was defeated and that he would support further rate hikes if necessary. Cleveland Fed President Loretta Mester said the central bank was unable to do much about slow long-term economic growth but could “do its part” by curbing prices.
US retail sales rose in April, suggesting consumer spending remains resilient despite economic headwinds such as inflation and high borrowing costs. Globally, faltering growth in Germany and signs of slowing momentum in China following the release of April data on Tuesday increased concerns of a global slowdown.
“We remain positive on the story of reopening,” said Lucy Meagher, investment advisor at Evans and Partners Pty. “Investors might have been hoping for a debt-fueled stimulus from the government in terms of reopening.” We expect it to be more of a self-sufficient, consumer-led recovery.”
Important events this week:
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Eurozone CPI, Wednesday
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BOE Gov. Andrew Bailey delivers a keynote address on Wednesday
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US housing construction starts on Wednesday
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US Initial Jobless Claims, Conference Board Benchmark Index, Existing Home Sales, Thursday
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Japanese CPI, Friday
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ECB President Christine Lagarde takes part in the panel discussion at the Brazilian Central Bank Conference on Friday
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New York Fed’s John Williams speaks at monetary policy research conference in Washington; Fed Chair Jerome Powell and former Chair Ben Bernanke will join the panel on Friday
Some of the key movements in the markets:
Shares
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S&P 500 futures were up 0.1% as of 9:42 a.m. Tokyo time. The S&P 500 fell 0.6%
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Nasdaq 100 futures were up 0.1%. The Nasdaq 100 rose 0.1%
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Japan’s Topix index rose 0.2%
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Australia’s S&P/ASX 200 index fell 0.9%
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Hong Kong’s Hang Seng futures fell 0.1%
currencies
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The Bloomberg Dollar Spot Index is little changed
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The euro was little changed at $1.0868
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The Japanese yen was little changed at 136.36 per dollar
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The offshore yuan was little changed at 6.9955 per dollar
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The Australian dollar was little changed at $0.6657
cryptocurrencies
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Bitcoin rose 0.4% to $27,069.24
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Ether was up 0.1% to $1,823.7
Bind
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The 10-year government bond yield was little changed at 3.53%
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Japan’s 10-year yield was little changed at 0.39%
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Australia’s 10-year yield rose four basis points to 3.45%
raw materials
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West Texas Intermediate crude fell 0.4% to $70.59 a barrel
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Spot gold rose 0.2% to $1,992.19 an ounce
This story was created with the support of Bloomberg Automation.
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