Asia stocks fall; Kiwi dollar falls as RBNZ hints hikes. As U.S. debt ceiling negotiations dragged on, Asian stocks extended a global sell-off, while the New Zealand dollar fell as the central bank surprised markets by announcing its tightening cycle was done.

Safe-haven demand, which drove Treasuries and lowered rates, kept the U.S. dollar high.

However, crude oil prices rose after the Saudi energy minister warned speculators of more OPEC+ supply cuts.
Asia’s biggest mover was the New Zealand dollar. After increasing to 5.5%, the Reserve Bank surprised investors by retaining its terminal rate prediction at 5.5%.

“It’s an indication that the tightening cycle is over,” Bank of New Zealand strategist Jason Wong said. That was unexpected. Traders expected a tightening streak and a half-point rise.

The Nikkei (.N225) fell 0.5%, continuing its decline from a post-bubble peak. Hong Kong’s Hang Seng (.HSI) fell 1%, and mainland blue chips (.CSI300) dropped 0.6%. The MSCI Asia-Pacific Broadest Index (.MIAP00000PUS) lost 0.4%.

After significant falls overnight, U.S. market futures predicted S&P 500 and Nasdaq gains of 0.15% at the opening.

On Tuesday, President Joe Biden and congressional Republicans completed another round of debt ceiling talks without progress.

According to Treasury Secretary Janet Yellen, the federal government may not have enough money to pay all its payments by June 1.

While a default that could cause a recession is undesirable for the U.S., investors anxious about the global economy have avoided riskier assets.

The problem was heightened by reports that Treasury had urged federal agencies to withhold payments.

“Payment prioritisation is now real,” noted Pepperstone’s chief of research, Chris Weston.

“And while it seems highly prudent to have this conversation, the market’s anxiety levels have heated up consequently,” he added. “Markets are de-risking.”

The U.S. dollar index, which measures the currency against six major rivals, fell 0.1% to 103.43 but remained near last week’s two-month high of 103.63.

Long-term Treasury yields fell to 3.68% in Tokyo from New York’s more than two-month peak of 3.696%.

Gold rose 0.1% to $1,977 as traders watched debt ceiling talks.

Saudi Energy Minister Prince Abdulaziz bin Salman urged speculators to “watch out,” warning “they will be ouching.” As a result, crude oil prices rose on Tuesday.

WTI increased 75 cents to $73.66 a barrel, while Brent crude futures rose 68 cents to $77.52.