Asian shares rise on US debt ceiling deal

Asian shares climbed and US stock futures edged higher on Monday after US President Joe Biden struck a deal with Republican House Speaker Kevin McCarthy that would raise the US debt ceiling and prevent an unprecedented default by early June .

Japan’s benchmark Topix stock index and Australia’s S&P/ASX 200 both rose about 1 per cent in morning trade in Asia, while Taiwan’s TiEx index added 0.7 per cent. Hong Kong’s Hang Seng and China’s CSI 300 fell 0.5 percent and 0.7 percent, respectively.

The S&P/NZX 50 index of New Zealand’s largest listed companies rose 0.9 percent. The Australian and New Zealand currencies strengthened against the US Dollar.

Markets in the US were closed on Monday for a holiday, but stock futures in Asia gave the S&P 500 a 0.3 percent gain and the tech-focused Nasdaq 0.4 percent. The former rose more than 1 percent on Friday to its highest level in nine months on rising hopes of a debt ceiling deal.

US Treasuries were steady in Asia on Monday, but the yield on the 10-year government bond closed 0.02 percentage points lower at 3.798 per cent on Friday. Bond yields move inversely to prices.

The deal on Saturday came after days of tense negotiations between the White House and Capitol Hill to prevent an imminent default before the US is expected to run out of cash to pay its obligations on June 5.

Both sides have moved to iron out dissent in their respective parties over the agreement ahead of an expected vote on Wednesday in the Republican-controlled House of Representatives, which will be followed by a vote in the Democrat-controlled Senate.

Rating agency Fitch last week placed the US’s Triple A credit rating on negative watch as a result of the impasse over the debt ceiling.

ANZ senior economist Tom Kenny said, “With a House vote on the deal likely mid-week, the bill’s fate remains uncertain, as some Republicans were prepared for big cuts and some Democrats wanted no cuts.” “

But he said recent readings on the US economy were strong enough that the US Federal Reserve could decide to continue raising interest rates “should financial and financial uncertainties blow over soon and without economic pain”.

In currency markets, trading was light in Asia ahead of Monday’s holiday in the US and the UK. Turkey’s lira stood at 20.04 per dollar, a record low, after President Recep Tayyip Erdoğan extended his rule into a third decade in a second round of voting over the weekend.