Stock market today: Asian shares mostly rise on hopes for US debt deal, but China declines

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Tokyo (AFP) – Asian stocks were mostly higher on Friday as hopes grew that the US Congress will reach a deal to avoid defaulting on the country’s debt.

Japan’s Nikkei 225 rose 0.8%, closing at 30,808.35. Australia’s S&P/ASX 200 rose 0.6% to 7,279.50. South Korea’s Kospi index rose 0.9 percent to 2,537.79.

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Chinese stocks fell amid renewed fears triggered by signs of an extended lockdown due to the coronavirus pandemic hurting sales. Analysts said that inflationary pressures and geopolitical risks are also weighing on Chinese stocks.

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Hong Kong’s Hang Seng fell 1.3% to 19,475.08, while the Shanghai Composite lost 0.4%, to 3,283.60.

“While the broader risk environment has been single-handedly lifted by progress on the US debt ceiling negotiations, Chinese stocks are still struggling for gains,” said Yeap Jun Rong, market analyst at IG.

President Joe Biden, who is now in Hiroshima for a summit of the Group of Seven major industrialized nations, said he was confident of reaching a deal with Republicans to allow the US government to increase the credit limit and borrow more.

The US government is set to run out of cash to pay its bills as soon as June 1 unless a deal is reached, and economists say a default on US federal debt could have dire consequences for financial markets and the economy.

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Wall Street stocks rose after more companies reported better-than-expected earnings, while yields rose after a Federal Reserve official warned that the end of rate hikes may not come as soon as Wall Street had hoped.

The S&P 500 rose 0.9%, adding to gains from the previous day as hopes grew that the US government could avoid defaulting on its debt. The Dow Jones Industrial Average added 115 points, or 0.3%, while the Nasdaq Composite gained 1.5%.

The S&P 500 rose 39.28 points, to 4,198.05. The Dow rose 115.14 to 33,535.91, and the Nasdaq rose 188.27 to 12,688.84.

Video game maker Take-Two Interactive posted the biggest gain in the S&P 500 after it predicted a massive jump in revenue for the fiscal year following this year. That sparked speculation that Grand Theft Auto VI is on its way, and its stock jumped 11.7%.

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Bath and Body Works came in second with a gain of 10.7%. It reported stronger revenue and earnings for the fourth quarter than analysts had expected.

Also helping to support Wall Street was another retailer, Wal-Mart, which rose 1.3% after reporting stronger-than-expected results for the fourth quarter. It raised its financial forecast for the full year, though it said it sees shoppers remaining cautious about spending.

Much scrutiny has been given to the retail industry because strong spending by American households has been one of the key pillars to pulling a slowing economy out of recession.

Stocks have remained remarkably resilient since early April despite a long list of concerns. One of the main reasons for this is the hope that the Fed will facilitate interest rate hikes, slowing inflation at the cost of risking a recession and demolishing prices in financial markets.

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The bet was widely that the Federal Reserve would pause at its next meeting in June. But Lori Logan, president of the Dallas Federal Reserve, dashed some of those hopes in a speech prepared for the Texas Bankers Association.

“Data may show in the coming weeks that it is appropriate to skip a meeting,” Logan said. “As of today, though, we’re not quite there yet.”

Treasury yields rose as traders increased their bets that the Federal Reserve will raise interest rates again at its June meeting, although most still expect a pause.

The yield on the 10-year Treasury rose to 3.64% from 3.57% late Wednesday. The two-year yield, which moves further based on Fed expectations, rose to 4.25% from 4.16%.

In energy trade, US benchmark crude rose 65 cents to $72.51 a barrel. Brent crude, the international benchmark, rose 73 cents to $76.59 a barrel.

In currency trading, the US dollar fell to 138.14 yen from 138.66 yen. The price of the euro was at $1.0786, up from $1.0777.

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AP business writer Stan Choi contributed.

Yuri Kageyama on Twitter https://twitter.com/yurikageyama