Asian Shares Set to Fall as Congress Mulls Accord: Markets Wrap

2023-05-31 06:48

Asian stocks are poised to slide Wednesday after momentum in US equities faded and Congress considered the debt

Asian stocks are poised to slide Wednesday after momentum in US equities faded and Congress considered the debt accord that’s needed to head off a catastrophic default.

Futures for Japan and Australia suggested small declines while contracts for Hong Kong fell more than 1%. Purchasing manager index data for China will be watched for any signs of change in the economy’s wobbly recovery, which has weighed on its share markets and currency.

The S&P 500 closed little changed Tuesday, while remaining slightly above 4,200. Energy companies dragged on the index as oil sank below $70 a barrel.

The Nasdaq 100 added 0.4% to extend this year’s surge to 31%, while ending off its high for the day as investors assessed the artificial-intelligence hype that’s boosted the index. Nvidia Corp. hovered near $1 trillion in value after announcing several AI-related products.

Major currencies were little changed in early Asian trading after a gauge of the dollar edged lower amid declines in Treasury yields. The yen was back on the strong side of the 140 level versus the dollar after Japan’s top currency official warned that Tokyo would take necessary action to support the yen.

The drop in Treasury yields from the highest levels since March reflected hopes the Congress will pass the debt deal. The House Rules Committee meets soon to decide whether the debt limit bill will get a full vote. Two far-right Republicans on the panel oppose it. House passage on Wednesday is critical to getting approval in the Senate — where there’s also GOP resistance — by the Monday deadline.

Treasury rates on 3- to 10-year maturities led the move. The two-year yield, more sensitive than longer maturities to the outlook for Federal Reserve policy, traded around 4.45%.

Stocks and bonds are sending opposite signals about whether US inflation will abate on its own, according to billionaire Cliff Asness, who called the divergence his “biggest concern.”

Unlike stocks, the bond market is telegraphing that the Federal Reserve will make aggressive interest-rate cuts over the next year or two, the co-founder of AQR Capital Management said on an episode of “Bloomberg Wealth with David Rubenstein.”

Fed Bank of Richmond President Thomas Barkin said he is looking for signs that demand is cooling to be convinced that US inflation will ease.

Traders also kept an eye on the latest economic reports, with US consumer confidence dropping to a six-month low as views about the labor market and the outlook for business conditions slipped ahead of a deal to raise the debt ceiling.

Key events this week:

China manufacturing PMI, non-manufacturing PMI, Wednesday.
US job openings, Wednesday.
Federal Reserve’s Beige Book, Wednesday.
Fed’s Patrick Harker, Susan Collins and Michelle Bowman speak at events, Wednesday.
China Caixin manufacturing PMI, Thursday.
Eurozone HCOB Eurozone Manufacturing PMI, CPI, unemployment, Thursday.
US construction spending, initial jobless claims, ISM Manufacturing, Thursday.
ECB President Christine Lagarde speaks at conference, Thursday.
Fed’s Patrick Harker speaks at webinar, Thursday.
US unemployment, nonfarm payrolls, Friday.

Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 7:36 a.m. Tokyo time. The S&P 500 was little changed Tuesday
Nasdaq 100 futures were little changed. The Nasdaq 100 rose 0.4%
Nikkei 225 futures fell 0.7%
Australia’s S&P/ASX 200 Index futures fell 0.5%
Hang Seng Index futures fell 1.3%

Currencies