Asian equities advanced, led by Japanese shares and tech stocks, with traders looking for clues of any breakthrough in negotiations in Washington to avert a US default.
Japan’s Topix index rose 0.5% at the open, heading for the highest close since 1990, while the Nikkei 225 gained around 0.7%. Solid fundamentals and expectations for structural changes “justify a bullish stance” on Japan’s equities, Goldman Sachs Group Inc. said. China is slated to publish a range of economic data including industrial production and retail sales.
South Korean equities also rallied, while Australian stocks were little changed. Futures for Hong Kong stocks ticked higher and traders will be watching Greater China technology companies after a 4% jump in the Nasdaq Golden Dragon China Index on Monday as money manager Michael Burry boosted his bullish bets on e-commerce giants JD.com Inc. and Alibaba Group Holding Ltd.
US equity futures edged lower before a meeting between President Joe Biden and House Speaker Kevin McCarthy Tuesday. The US stock market gained Monday amid mixed signals sent by both factions in the debt-ceiling talks. Treasury Secretary Janet Yellen reiterated her department may run out of cash as soon as June 1 unless Congress raises or suspends the federal debt limit.
The dollar and Treasuries were both little changed in early trading in Asia, while Australian and New Zealand bonds opened lower. The Aussie dollar crept higher before the release of Reserve Bank of Australia’s meeting minutes, which may offer new clues on the nation’s interest-rate path as much of the developed world continues to battle high inflation.
In Asia, investors are monitoring signs the move by China’s central bank to inject more long-term liquidity into the financial system for the sixth month may finally deliver a post-pandemic boost to economic growth.
More Volatility
UBS Private Wealth Management expects to see more volatility in the markets, especially on the short-end of the Treasury curve, as deadline approaches on the debt-ceiling dispute. “If you’re someone who has cash on the sideline, right now we are recommending that you go ahead and you lock in those improved bond yields,” Sarah Ponczek, financial adviser, said on Bloomberg Television.
Meanwhile, data showed New York manufacturing slid the most since April 2020. This week’s figures will likely underscore more economic weakness, emboldening the Federal Reserve’s dovish voices even though inflation has failed to reassure, according to Anna Wong at Bloomberg Economics. Two Fed officials indicated they favored pausing rate hikes.
JPMorgan Chase & Co.’s Marko Kolanovic joined a chorus of Wall Street strategists Monday in warning that the US debt-ceiling impasse is yet another headwind threatening the outlook for equity markets. Morgan Stanley’s Mike Wilson delivered a similar warning on the debt-ceiling deadline, noting the bank’s clients said the issue is unlikely to be resolved without some near-term volatility.
Key events this week:
- China retail sales, industrial production, Tuesday
- Eurozone GDP, Tuesday
- US retail sales, industrial production, business inventories, Tuesday
- Fed speakers include Cleveland’s Loretta Mester, New York’s John Williams, Atlanta’s Raphael Bostic and Chicago’s Austan Goolsbee, Tuesday
- Eurozone CPI, Wednesday
- BOE Governor Andrew Bailey delivers keynote speech, Wednesday
- US housing starts, Wednesday
- US initial jobless claims, Conference Board leading index, existing home sales, Thursday
- Japan CPI, Friday
- 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 fell 0.1% as of 9:11 a.m. Tokyo time. The S&P 500 rose 0.3% Monday
- Nasdaq 100 futures were little changed. The Nasdaq 100 rose 0.6%
- Japan’s Topix index rose 0.4%
- Australia’s S&P/ASX 200 Index fell 0.1%
- Hong Kong’s Hang Seng futures rose 1.1.%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0877
- The Japanese yen rose 0.1% to 135.98 per dollar
- The offshore yuan was little changed at 6.9602 per dollar
- The Australian dollar was little changed at $0.6705
Cryptocurrencies
- Bitcoin fell 0.5% to $27,220.55
- Ether fell 0.4% to $1,818.13
Bonds
- The yield on 10-year Treasuries was unchanged at 3.50%
- Australia’s 10-year yield advanced four basis points to 3.46%
Commodities
- West Texas Intermediate crude rose 0.3% to $71.33 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
