Wall Street’s debt ceiling optimism boosts Asian stocks. Asia shares surged on Thursday, following Wall Street, while the dollar hovered just below a two-month high against the yen amid signals Washington may be close to a debt ceiling deal to avoid a first-ever default.
President Joe Biden and top Republican Kevin McCarthy pledged to work directly on a compromise on Wednesday amid fears that the Treasury could run out of money by June.
Biden will return from Asia to talks on Sunday.
That reassurance lifted MSCI’s broadest Asia-Pacific share index (.MIAP00000PUS) by 0.85%.
“Markets have chosen to be optimistic,” National Australia Bank senior FX analyst Rodrigo Catril wrote in a client note.
He continued, “History, of course, tells us that a deal is more likely than not to be reached on the 11th hour, suggesting there is still room for a few bad headlines,” for example. Moreover, “Treasury has almost exhausted its authorized extraordinary measures to pay the bills.”
Japan’s Nikkei (.N225) continued to outperform, rising to a 20-month high of 30,667.13 before closing 1.6% higher at 30,575. Above 30,795.78, it would reach its highest since 1990, before Japan’s bubble economy exploded.
Hang Seng (.HSI) rose over 1%. The.CSI300 increased by 0.39%.
Australia’s stock benchmark rose 0.5% as domestic data showed an unexpected drop in employment in April, relieving the central bank of pressure to tighteHowever, after the jobs news, the Aussie currency dropped 0.44%.
Futures predicted 0.5% opening advances for the UK FTSE (.FTSE) and German DAX (.GDAXI).
U.S. stock futures were flat, suggesting the Wall Street rally was over.
Tokyo long-term U.S. Treasury yields fell after jumping to 3.589% in New York.
At 137.745 yen, the dollar reached a two-week high, 0.035 yen below its March 8 high. It edged closer to the six-week high of $1.08105 per euro achieved overnight.
On Wednesday, the dollar reached a five 1/2-month high above 7 yuan in offshore trading.
A spate of lackluster statistics suggested Asia’s biggest economy may have reached its post-COVID recovery peak, putting pressure on the renminbi (RMB).
“While RMB sentiment has been deteriorating quickly… we do not see panic selling taking place,” Mizuho Bank’s top Asian FX analyst Ken Cheung stated in research.
“We are not turning bearish on RMB in the medium term as China annual growth should still outperform other major economies.”
Gold rebounded from a three-week low of $1,974.30 to $1,979. After Wednesday’s $2 Brent/WTI rallies, oil eased.
Brent crude fell 24 cents to $76.72. WTI fell 21 cents to $72.62. Brent crude futures fell 20 cents to $76.76, and WTI fell 20 cents to $72.63.
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