Asian stocks rise on optimism about the thaw between the US and China: the markets are turning

(Bloomberg) — U.S. and European stock futures were flat as investors awaited potential progress in debt reduction talks, while Asian stocks rose after President Joe Biden said relations with China should improve “very soon.”

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Hong Kong stocks led gains in Asia, with the Hang Seng index jumping more than 1%, propelled higher by technology companies. Historically cheap valuations after consecutive weekly declines added further support. The regional rally also saw shares in Japan, South Korea and mainland China rise, but excluded the Australian blue chips.

“I think you’ll see that starts to improve very soon,” Biden said of US-China relations in remarks on Sunday after the G7 summit in Japan. He added that his administration is considering whether to lift sanctions against Chinese Defense Minister Li Changfu.

Traders also remain focused on the Fed’s benchmark interest rate path, as bets on a June hike have narrowed to 25% as Jerome Powell signaled a pause. Dow Jones reported that Minneapolis Fed President Neil Kashkari also said he might support a pause.

Chris Weston, Head of Research, Pepperstone Group Ltd. , in a research note: “Market prices have returned aggressively to thinking the Fed will pause.” “The US debt ceiling, and price action in US banks, will dominate the narrative.”

South Korea’s Kospi Index rose as much as 1%, on track for its sixth daily advance. Samsung Electronics and SK Hynix Inc. Among the largest contributors to the index after China said its US rival Micron Technology Inc. Failed to pass a cyber security review.

The South Korean won led the gains among emerging market currencies while the offshore yuan weakened. The dollar scale hasn’t changed a bit. Treasury bonds made small gains.

Debt talks

President Biden and House Speaker Kevin McCarthy are set to meet in Washington on Monday after a “productive” call between the pair over the weekend. However, one Republican negotiator is insisting on a spending limit for several years, complicating talks even as the default occurs as early as June 1.

Although the debt limit deadline is more than a week away, the effective deal deadline could be much closer. That’s because lawmakers have to pass anything Biden and McCarthy can agree to, and that process can take several days.

McCarthy said last week that in order to meet the June 1 deadline, the House of Representatives would have to vote this week on any compromise plan. The Senate will then adopt the legislation, before it goes to Biden’s desk to be signed into law.

Stocks are poised to fall if the US fails to raise the debt limit and delay government payments, according to UBS strategists. The team led by Jonathan Pingel said that although it’s unlikely, if the US formally defaults and delays all payments beyond base payments for a week, the S&P 500 will drop 20% towards 3400.

Meanwhile in India, shorter-maturity bonds rebounded on bets that the withdrawal of the country’s highest-valued currency would leave banks with spare cash to invest.

Iron ore declined due to uncertainty about demand from China. Oil extended its decline for two days and gold fell after gaining 1% on Friday. Bitcoin fell, staying below $27,000.

Main events this week:

  • Eurozone Consumer Confidence, Monday

  • The Fed Chairs speaking are James Bullard, Raphael Bostick and Thomas Parkin on Monday

  • The Eurozone’s S&P manufacturing and services PMI, Tuesday

  • US new home sales, Tuesday

  • Dallas Federal Reserve Chairman Lori Logan speaks on Tuesday

  • The Fed releases the minutes of its May 2-3 monetary policy meeting, Wednesday

  • Bank of England Governor Andrew Bailey speaks, Wednesday

  • US Initial Jobless Claims, GDP, Thursday

  • Interest rate decisions in Türkiye, South Africa, Indonesia and South Korea Thursday

  • Tokyo CPI, Friday

  • US Consumer Income, Wholesale Inventories, Durable Goods, University of Michigan Consumer Confidence, Friday

Some of the major movements in the markets:


  • S&P 500 futures were little changed as of 7:06 a.m. London time. The S&P 500 fell 0.1% on Friday

  • Nasdaq 100 futures have changed little. The Nasdaq 100 fell 0.2% on Friday.

  • Japan’s Topix rose 0.7%.

  • Australia’s S&P/ASX 200 fell 0.2%

  • Hong Kong’s Hang Seng rose 1.4%

  • The Shanghai Composite Index rose 0.3%.

  • Euro Stoxx 50 futures have changed little


  • The Bloomberg Spot Dollar Index has not changed

  • The euro was little changed at $1.0815

  • The Japanese yen was little changed at 138.00 per dollar

  • The offshore yuan fell 0.1 percent to 7.0345 per dollar

  • The Australian dollar fell 0.2% to $0.6639

  • The British pound has not changed much at $1.2443

Digital currencies

  • Bitcoin fell 0.3% to $26,782.31

  • Ether hasn’t changed much at $1804.8


  • The yield on the 10-year Treasury note was little changed at 3.67%.

  • The 10-year Japanese bond yield fell 2 basis points, to 0.38%.

  • The yield on the 10-year Australian Treasury note was little changed at 3.59%.


  • West Texas Intermediate crude fell 0.8% to $70.96 a barrel

  • Spot gold fell 0.2 percent to $1,973.15 an ounce

This story was produced with help from Bloomberg Automation.

– With assistance from Rita Nazareth and Tasia Sipahutar.

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