TOKYO (`) – Asian stocks were mostly higher on Friday amid growing hopes that the US Congress will reach an agreement to prevent the country from defaulting.
Japan’s benchmark Nikkei 225 rose 0.8% to 30,827.87 in early trade. Australia’s S&P/ASX 200 rose 0.5% to 7,270.20. South Korea’s kospi rose 0.6% to 2,529.68.
Chinese stocks fell on renewed concerns sparked by signs a prolonged lockdown over the coronavirus pandemic was hurting sales. Inflationary pressures and geopolitical risks also weighed on Chinese stocks, analysts said.
Hong Kong’s Hang Seng slipped 1.4% to 19,449.72, while the Shanghai Composite slipped 0.7% to 3,274.87.
“While the overall risk environment has been single-handedly improved by progress in US debt ceiling negotiations, Chinese stocks continue to struggle for gains,” said Yeap Jun Rong, market analyst at IG.
President Joe Biden, currently in Hiroshima for the G7 summit of developed nations, has said he is confident of reaching an agreement with Republicans that would allow the US government to increase its credit limit and borrow more .
The US government is expected to run out of money to pay its bills as early as June 1 unless an agreement is reached. According to economists, a default by the US federal government could have catastrophic consequences for financial markets and the economy.
Wall Street stocks rose after more companies reported better-than-expected earnings, while yields rose after a Federal Reserve official warned that the end of rate hikes may not come as quickly as Wall Street had hoped.
The S&P 500 was up 0.9%, adding to its rally from the previous day as hopes grew that the US government could avoid a catastrophic default on its debt. The Dow Jones Industrial Average gained 115 points, or 0.3%, while the Nasdaq Composite gained 1.5%.
The S&P 500 rose 39.28 points to 4,198.05. The Dow rose 115.14 to 33,535.91 and the Nasdaq climbed 188.27 to 12,688.84.
Video game maker Take-Two Interactive posted the biggest gain in the S&P 500 after forecasting a huge jump in revenue for the following fiscal year. That fueled speculation that Grand Theft Auto VI was on the way, and the stock rose 11.7%.
Bath & Body Works was just behind, up 10.7%. The company reported higher sales and earnings than analysts had expected for the most recent quarter.
Also adding to Wall Street’s support was another retailer, Walmart, which rose 1.3% after reporting better-than-expected results for the most recent quarter. The company has raised its full-year financial guidance but said buyers remain cautious about their spending.
Retail came under scrutiny as strong US household spending has been one of the main pillars to keep the slowing economy from recession.
Despite a long list of concerns, stocks have remained remarkably resilient since early April. A key reason for this is hope that the Fed would ease its rate hikes, which have slowed inflation at the expense of a recession and falling prices in financial markets.
The popular bet was that the Fed would take a break at its next meeting in June. But Dallas Fed President Lorie Logan cooled some of those hopes in a prepared speech for the Texas Bankers Association.
“Data over the coming weeks may yet show that it is appropriate to skip a meeting,” Logan said. “But today we are not ready yet.”
Treasury yields rose as traders increased bets that the Fed would hike rates again at its June meeting, though the majority still forecast a pause.
The yield on the 10-year government bond rose to 3.64% from 3.57% late Wednesday. The two-year yield, which is closer to Fed expectations, rose to 4.25% from 4.16%.
In energy trading, the reference price for US crude fell 12 cents to $71.74 a barrel. Brent crude, the international standard, fell 7 cents to $75.79 a barrel.
In forex trading, the US dollar fell to 138.53 Japanese yen from 138.66 yen. The euro was down from $1.0777 at $1.0764.
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` business journalist Stan Choe contributed.
Yuri Kageyama is on Twitter https://twitter.com/yurikageyama
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