Asian stocks are expected to fall 1.3% per week
Japan’s Nikkei aim for seven consecutive winning weeks
Treasuries rally on hopes of US debt ceiling deal
By Tom Westbrook
SINGAPORE, May 26 (Reuters) – Asian stock markets rose cautiously on Friday, with Japan leading the gains, while the dollar took a breather as investors hoped for an eleventh-hour deal to avoid a default. of US debt.
MSCI’s broadest index of Asia-Pacific stocks outside Japan rose 0.6% in holiday-thinned trade in Hong Kong. The index is down 1.3% over the week.
S&P 500 futures fell 0.1% and European futures were flat as traders pulled back after a few days of frantic buying of chip and artificial intelligence stocks.
The Japanese Nikkei trailed the gains, rising 0.6% as revenue and production upgrades from US chipmaker Nvidia boosted exposure for Japanese companies.
The Nikkei is up 0.5% on the week and heading for a seventh consecutive weekly gain – its longest weekly streak in five years and one that added some $460 billion to Japanese stocks.
May data on Friday showed inflation slowing to 3.3% in Tokyo, a decent indicator for the country, meaning it is comfortably above the Bank of Canada’s 2% target. Japan for a year now. The world’s third largest economy has struggled for decades to achieve significant and sustained increases in prices, profits and wages.
“The pandemic has resulted in an unprecedented set of inflationary factors for Japan,” said Nomura analysts, who noted that households were spending and improved inventory forecast ranges.
“These forces have caused a dramatic change in the pricing behavior of Japanese companies, and thus an improvement in their profit margins.”
A weak yen also helped flatter Japanese exporters’ accounts and although it slipped to the stronger side of 140 to the dollar on Friday, it is down 1.3% this week on concern over a potential US debt default that boosted the greenback.
The dollar is up about 0.6% against the euro for the week and last traded a little lower at $1.0736 per euro. The US dollar index hit a three-month high of 104.31 overnight and last settled at 104.10, up 0.9% on the week.
US President Joe Biden and Republican Congressman Kevin McCarthy are close to reaching a deal to raise the US government debt ceiling by $31.4 trillion for two years, a US official has told Reuters, but hurry up.
The US Treasury estimates it will run out of funds within a week and legislating any deal will put that on the line, and even then it is unlikely to instantly resolve market jitters.
“If you can fix this, you’re now allowing the US Treasury to issue bonds and bills…that’s going to take a lot of cash out of the banks,” said Damien Boey, chief equity strategist at investment bank Barrenjoey based in Sydney. .
Prices of Treasuries maturing on the so-called X date of June 1 rallied on hopes of a breakout, while the rest of the curve came under pressure as investors also worried that US rates do not increase.
Two-year yields hit a 2.5-month high at 4.552% in Asia on Friday, up 24 basis points on the week.
The New Zealand dollar was a big loser for the week, plunging 3% to test 60 cents as nerves over the US rate hike coalesced with the New Zealand central bank all but shutting down rate hikes at its Wednesday meeting.
The kiwi was last at $0.6068.
The Chinese yuan was the other notable victim and slid along with Chinese equities as the shine came off expectations of a booming post-pandemic recovery.
The yuan has fallen for three weeks in a row and is down around 0.8% this week to hit lows not seen since China remained in the grip of COVID lockdowns late last year. It was last at 7.0679 to the dollar.
“U.S. debt issues aren’t the only ‘ceiling’ we face, as a slowdown in Chinese economic data suggests a growth ceiling may also be forming,” said RBC technical strategist George Davis.
Copper, a growth indicator, hit a six-month low in Shanghai on Thursday and fell about 2.5% on the week.
Singapore iron ore is down about 3% on the week. Brent futures were flat around $76 a barrel. Spot gold is at $1,947 an ounce.
(Edited by Lincoln Feast)