Markets

Hang Seng Surges, Nikkei Advances on US Debt Breakthrough

 

Asian stock indexes ended the week on the front foot with investors’ spirits high after the US Senate passed legislation lifting the government’s $31.4 trillion debt ceiling, avoiding a catastrophic default.

Japanese stocks rose, with the benchmark Nikkei index closing at a three-decade high, after Washington lawmakers voted to raise the debt limit and on signs central bankers are in no hurry to tighten the monetary policy.

SoftBank Group Corp rose 4.3% amid speculation its chip unit will benefit from a boom in artificial intelligence investment. T&D Holdings, Inc leapt 4.28%, leading insurers higher as risks of a financial catastrophe from a US default evaporated.

 

Also on AF: China, India Imports of Russian Oil Surge to Record Highs

 

Meanwhile, Bank of Japan Governor Kazuo Ueda told lawmakers the central bank did not have a time-frame for achieving its 2% inflation target.

The Nikkei index advanced 1.21% to 31,384.93, the highest close since July 1990. The broader Topix rose 1.55% to 2,182.70. The Nikkei has climbed 2% over the past five sessions, clocking in an eighth straight weekly advance.

Hong Kong stocks ended an otherwise gloomy week with their best day in months, joining the Asian rally fuelled by the breakthrough on the US debt ceiling stand-off.

The appetite for risky assets was also fuelled by bets the Federal Reserve might stand still on interest rates in its next meeting.

The Hang Seng Index surged 4.02%, or 733.03 points, to 18,949.94. The gauge had touched six-month lows this week on China growth concerns and geopolitical tensions.

The Shanghai Composite Index rose 0.79%, or 25.43 points, to 3,230.07, while the Shenzhen Composite Index on China’s second exchange advanced 1.16%, or 23.39 points, to 2,035.62.

Elsewhere across the region, in early trade, Sydney, Seoul, Taipei and Manila were also deep in positive territory.

MSCI’s broadest index of Asia-Pacific shares outside Japan surged 2% and was on course for its biggest one-day percentage gain since early January.

 

Upbeat US Labour Data

Overnight, major US equity indexes closed at their highest levels since August 2022 after resilient labour market data added to optimism that the Federal Reserve can steer the economy to a soft landing.

The exuberant mood looked set to continue in Europe, with Eurostoxx 50 futures up 0.45%, German DAX futures up 0.49% and FTSE futures 0.18% higher. E-mini futures for the S&P 500 rose 0.20%.

Also lifting risk sentiment was changing expectations of the Fed’s monetary policy, with traders steadily dialling back their bets on the central bank raising interest rates again this month.

Markets are now pricing in a 20% chance of the central bank hiking by 25 basis points (bps) compared to a 50% chance a week earlier, according to the CME FedWatch tool.

Data overnight showed the number of Americans filing new claims for unemployment benefits increased modestly last week and private employers hired more workers than expected in May, pointing to continued labour market tightness.

The spotlight will be on the Labor Department’s closely watched unemployment report for May, due later on Friday. The data will help determine whether the Fed sticks with its aggressive rate hikes.

 

US Dollar Index Flat

In Asian hours, the two-year US Treasury yield, which typically moves in step with interest rate expectations, was up 0.8 bps at 4.349%, having slipped around 5 bps on Thursday.

In the currency market, the dollar index, which measures the US currency against six major peers, was flat after dropping 0.6% overnight.

The Japanese yen weakened 0.11% to 138.93 per dollar, while sterling was last trading at $1.2527, up 0.02% on the day.

The bullish sentiment helped push oil prices higher, with US crude up 0.53% to $70.47 per barrel and Brent at $74.67, up 0.53% on the day. Markets are also weighing the likelihood of price-supportive OPEC+ production cuts over the weekend.

 

Key figures

Tokyo – Nikkei 225 > UP 1.21% at 31,524.22 (close)

Hong Kong – Hang Seng Index > UP 4.02% at 18,949.94 (close)

Shanghai – Composite > UP 0.79% at 3,230.07 (close)

London – FTSE 100 > UP 0.68% at 7,541.18 (0935 GMT)

New York – Dow > UP 0.47% at 33,061.57 (Thursday close)

 

  • Reuters with additional editing by Sean O’Meara

 

Read more:

Foreigners Pulled $1.7 Billion Out of China Shares in May

Singapore Tech Giant Sea Pulls Plug on Investment Arm

 

 

Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.

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