Asian stocks and Wall Street futures rose on Monday as the agreement reached over the weekend by the president of the United StatesUS President Joe Biden and House Speaker Kevin McCarthy to lift the country’s debt ceiling brought a relief to investors, though concerns about China dampened sentiment.
The pan-European Euro Stoxx 50 futures rose 0.2%, while the S&P 500 futures rose 0.3% and the Nasdaq 0.5%. After weeks of negotiations, Republican Congressman McCarthy and Democratic President Biden agreed on Saturday to avoid an economically destabilizing default by suspending the $31.4 trillion debt ceiling through 2025. The deal must be approved by a deeply divided Congress before it can be passed. The United States runs out of money to pay its debt in early June.
In Asia, the broader MSCI index of Asia-Pacific stocks, which does not include Japan, rose 0.2%, with falls in Chinese and Hong Kong stocks offsetting other gains. Elsewhere, Tokyo’s Nikkei was up 1.0% to a new 33-year high, and Australian stocks were up 1.0%.
Challenging the uptrend, Chinese stocks were down 0.6% and Hong Kong’s Hang Seng Index was down 0.8%, after weak earnings data from Chinese industrial firms added to signs of weakness in the world’s second-biggest economy. world.
2 data that could moderate the relief
“It’s possible that there will be some initial relief that will push yields down slightly and the dollar will rise a bit, along with equities. But the vicissitudes of the deal’s passage in Congress may dampen (optimism),” Vishnu said. Varathan, head of economics at Mizuho Bank in Singapore.
“And beyond that, the prevailing implications of tightening issuance liquidity to bolster drying cash at the Treasury may perversely lift yields and dampen equities.”
Holiday in the USA
Spot US Treasuries were not trading in Asia on Monday due to the Memorial Day holiday, while futures were flat. Two-year yields hit a 2 1/2-month high of 4.6390% on Friday as the market bets on higher Federal Reserve rates for longer.
US stocks rose late last week on hopes of a debt ceiling deal and bets on artificial intelligence companies. The Dow Jones industrial index 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 was going to be a resolution and now we have it, so that removes some of the uncertainty for the markets. But when we get past that, when the ballots go through and when we come back from the Memorial Day holiday, the question It will be: what’s next?” said Tony Sycamore, IG markets analyst.
“Yes, we will get the relief bounce in the short term, but then we have to start thinking about the June FOMC meeting, inflation being tougher than expected and money leaving the markets.”
The Federal Reserve’s preferred inflation gauge, the personal consumption expenditures (PCE) price index, came in stronger than expected on Friday. Coupled with the strength of US consumer spending, markets are now favoring a quarter point hike from the Federal Reserve next month and expect rates to stay at that level for the rest of the year.
Data on job openings and the job creation report due later in the week could influence the Federal Reserve’s June decision. Economists polled by Reuters forecast an increase in payrolls of 195,000 jobs in May, compared to 253,000 the previous month.
In Turkey, the lira was trading at 20.05 against the dollar, just above its record low of 20.06 hit on Friday, after President Tayyip Erdogan won the country’s presidential election, extending his increasingly more authoritarian government a third decade.
In currency markets, the dollar index, which measures the value of the greenback against its main rivals, was down slightly at 104.17 as risk-sensitive currencies rallied. However, it remains close to the two-month high reached on Friday.
Oil prices rise. Brent crude futures added 0.8% to $77.47 a barrel, while West Texas Intermediate crude was at $73.25 a barrel, also up 0.8%.