Asia Stocks, US Futures Rise on Debt-Ceiling Hopes: Markets Wrap

Asian stocks advanced alongside US equity futures on rising hopes that lawmakers in Washington will avert a first-ever US default.

(Bloomberg) — Asian stocks advanced alongside US equity futures on rising hopes that lawmakers in Washington will avert a first-ever US default. 

Shares in Japan, Australia and South Korea all edged higher. The advance for the Topix Index placed the gauge of Japanese blue chips on course for its best week since November and a fresh 33-year high. Hong Kong futures fell after Alibaba Group Holding Ltd.’s sales disappointed, adding to signs that China’s post-Covid recovery is faltering.

Contracts for the S&P 500 climbed after the index ended Thursday at the highest level in nine months. Nasdaq 100 futures also rose after the tech-heavy gauge rose nearly 2% in a rally that pushed down Wall Street’s fear gauge, the Cboe Volatility Index.

Bond yields rose in Australia and New Zealand and Treasuries were flat after a Thursday selloff pushed rates higher on speculation the Federal Reserve will need to keep borrowing costs higher for longer as inflation remains elevated. An index of the dollar was little changed after advancing by the most in two months in the prior session.

“The moderation in inflation from 9% at its peak to 5% at the last print allows the Fed to take a pause,” Belita Ong of Dalton Investments, said in an interview with Bloomberg Television. “Especially when coupled with weakness that we’ve seen in the employment data as well as the bank failures that have apparently led to tightening credit conditions.”

House Speaker Kevin McCarthy and Senate Majority Leader Chuck Schumer are making plans for votes in the coming days on a bipartisan deal to avert a US debt default. Treasury Secretary Janet Yellen told top bank executives that a failure to raise the debt ceiling would be “catastrophic” for the financial system, reiterating that the matter should be addressed without delay.

In Asia, the yen rose slightly after Japan’s inflation re-accelerated in April after months of cooling. That may keep alive speculation that the central bank may have to revise its price outlook after waning expectations for policy normalization in the previous session saw the currency touch its weakest level this year against the dollar.

Separately, volumes in Chinese shares on the mainland and Hong Kong have been shrinking as the focus returns to the nation’s lackluster economy. 

That has fed into commodities, with the Bloomberg Commodity Index set for a fifth weekly decline, the longest such streak since September. Oil has benefited from some of the risk-on sentiment, set for its first weekly advance in more than a month. 

Fed Rate Bets

Meantime, traders amped up wagers on a June central bank hike to about 40% after Fed Bank of Dallas President Lorie Logan said the case for a pause next month is not clear. In contrasting remarks, central bank Governor Philip Jefferson outlined the dovish case for patience. 

About $1.7 trillion of derivatives contracts tied to stocks and indexes are scheduled to expire Friday, according to data compiled by Goldman Sachs Group Inc. strategist John Marshall.

The monthly event, known as OpEx, typically obliges traders to either roll over existing positions or start new ones. That usually involves portfolio adjustments that lead to a spike in trading volume and sudden price swings. 

Key events this week:

  • ECB President Christine Lagarde participates in panel at Brazil central bank conference, Friday
  • New York Fed’s John Williams speaks at monetary policy research conference in Washington; Fed Chair Jerome Powell and former chair Ben Bernanke to take part in panel discussion, Friday

 

Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.1% as of 9:35 a.m. Tokyo time. The S&P 500 rose 0.9%
  • Nasdaq 100 futures rose 0.3%. The Nasdaq 100 rose 1.9%
  • Hang Seng futures fell 1.1%
  • Japan’s Topix rose 0.3%
  • Australia’s S&P/ASX 200 rose 0.5%
  • Euro Stoxx 50 futures rose 0.4%

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The euro was little changed at $1.0778
  • The Japanese yen rose 0.2% to 138.41 per dollar
  • The offshore yuan was little changed at 7.0461 per dollar
  • The Australian dollar rose 0.2% to $0.6635

Cryptocurrencies

  • Bitcoin rose 0.6% to $26,890.14
  • Ether rose 0.5% to $1,804.9

Bonds

  • The yield on 10-year Treasuries was little changed at 3.64%
  • Australia’s 10-year yield advanced 10 basis points to 3.58%

Commodities

  • West Texas Intermediate crude was little changed
  • Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Rita Nazareth.

More stories like this are available on bloomberg.com

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