Asia’s stock indexes began the week on the front foot boosted by Chinese tech stocks, guarded optimism over a US debt deal and bargain-buying amid strong corporate earnings.
Regional chip shares rose after China banned memory chip purchases from US firm Micron Technology, while there was some positivity ahead of US debt ceiling negotiations which are approaching crunch time after stalling last week.
Japan’s Nikkei share average ended higher, posting an eighth straight session of gains, as investors continued to scoop up discounted domestic stocks.
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The Nikkei reversed course to jump 0.90% to 31,086.82, its highest close since July 1990 and in the longest winning streak since April 2023. The broader Topix rose 0.66% to 2,175.90.
The Nikkei hit its 33-year high on Friday, buoyed by ongoing improvement of shareholder returns, a robust outlook and the yen’s weakness.
China stocks rose after the country’s central bank vowed to support economic growth and US President Joe Biden said he expected a thaw in frosty relations with China “shortly”.
Biden said on Sunday the Group of Seven nations were agreed in their approach to China and the need to diversify their supply chains so they are not dependent on one country.
“We’re not looking to decouple from China. We’re looking to de-risk and diversify our relationship with China,” he said.
The Shanghai Composite Index rose 0.39%, or 12.93 points, to 3,296.47, while the Shenzhen Composite Index on China’s second exchange edged up 0.39% too, or 7.86 points, to 2,038.96.
Shares in some Chinese memory chipmaking-related companies were up after China failed US memory chip rival Micron Technology Inc’s products in a security review.
Tech giants listed in Hong Kong advanced 2.4%, with short video platform Kuaishou Technology up 6.3% ahead of earnings results.
Hong Kong’s benchmark Hang Seng Index gained 1.17%, or 227.60 points, to close at 19,678.17, while the China Enterprises Index added 1.51%.
Elsewhere across the region, in earlier trade, Seoul, Singapore, Mumbai, Taipei, Jakarta and Bangkok were also up, though there were losses in Sydney, Manila and Wellington.
MSCI’s broadest index of Asia-Pacific shares outside Japan was last up 0.5%.
Biden, McCarthy Debt Ceiling Talks
Europe is set to extend the caution, with pan-regional Euro Stoxx 50 futures pointing to a flat open. S&P 500 futures were also little changed while Nasdaq futures were up 0.1%.
US President Joe Biden and House Republican Speaker Kevin McCarthy will meet to discuss the debt ceiling on Monday, less than two weeks before the June 1 deadline after which Treasury expects the federal government will struggle to pay its debts.
A failure to lift the debt ceiling would trigger a default, likely sparking chaos in financial markets and a spike in interest rates.
On Friday, reports that debt ceiling negotiations had reached an impasse rattled markets even as Federal Reserve Chairman Jerome Powell said US interest rates might not need to rise as much given the tighter credit conditions from the banking crisis.
Futures are pricing in an about a 90% chance that the Fed would keep rates unchanged at its next meeting in June, and a total of almost 50 basis points of cuts by the end of the year.
That has knocked the dollar off a two-month top against a basket of major peers and was last at 103.05 on Monday, flat for the day.
Yellen Warning on Bank Failures
Meanwhile, regional US bank shares continued to fall on Friday, as Treasury Secretary Janet Yellen reportedly warned that more mergers may be necessary after a series of bank failures.
Later in the week, the Fed will release minutes of the May meeting on Wednesday, while US personal consumption expenditures (PCE) inflation data is due out on Friday.
In the Treasuries market, debt ceiling concerns have created large distortions in the short-end of the yield curve as investors avoid bills that come due when the Treasury is at risk of running out of funds.
The yield on the 1-month Treasury bill jumped 15 basis points to 5.6677% on Monday.
Two-year yields were five basis points lower to 4.2387%, pulling away from a recent two-month high, while the 10-year yield also dipped four bps to 3.6536%.
Oil prices took a hit and US crude futures were down 0.9% to $70.94 per barrel, while Brent crude futures fell 0.8% to $75.01 per barrel. Gold prices were largely unchanged at $1,976.19 per ounce.
Key figures
Tokyo – Nikkei 225 > UP 0.90% at 31,086.82 (close)
Hong Kong – Hang Seng Index > UP 1.17% at 19,678.17 (close)
Shanghai – Composite > UP 0.39% at 3,296.47 (close)
London – FTSE 100 > UP 0.31% at 7,780.66 (close)
New York – Dow < DOWN 0.33% at 33,426.63 (Friday close)
- Reuters with additional editing by Sean O’Meara
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