Asian shares muted, US debt ceiling talks weigh on risk appetite

SINGAPORE  – Asian shares were subdued on Wednesday and the dollar hovered around a five-week peak as investors remained risk averse, with the U.S. debt ceiling talks and a mixed set of economic data weighing on sentiment.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.09 percent in choppy trading, with Australia’s S&P/ASX 200 index down 0.45 percent.

Democratic President Joe Biden and top congressional Republican Kevin McCarthy edged closer to a deal to avoid a looming U.S. debt default Tuesday.

After an hour of talks, McCarthy, the speaker of the House of Representatives, told reporters the two sides remained far apart on an agreement to lift the debt ceiling.

But he said, “It is possible to get a deal by the end of the week. It’s not that difficult to get to an agreement.”

Without an agreement, in about two weeks, the government might not be able to pay its bills, with economists fearing the country will likely slide into a recession.

https://business.inquirer.net/400351/biden-warns-of-recession-unless-republicans-back-his-debt-ceiling-plan

Futures indicated European stocks were set for a lower open, with Eurostoxx 50 futures down 0.14 percent., German DAX futures down 0.02 percent. and FTSE futures down 0.17 percent..

As the deadline approaches, “one thing investors can be certain of is that more uncertainty lies ahead”, said Saira Malik, chief investment officer at Nuveen. Malik expects further volatility across equity and fixed income markets until there is greater clarity on the outcome of the negotiations.

U.S. stocks indexes closed down overnight, hamstrung by dour forecast from Home Depot and mixed April U.S. retail sales data.

Recent economic data indicates slowing in the U.S. economy following a string of rate hikes by the Federal Reserve to fight high inflation. Markets are pricing the Fed to cut rates towards the end of the year, according to CME FedWatch tool, but some Fed officials have stuck to a hawkish rhetoric.

Atlanta Fed president Raphael Bostic said the Fed would need to stay “super strong” in fighting inflation even if the unemployment rate starts to rise later in the year, while Chicago Federal Reserve President Austan Goolsbee said it was premature to be discussing interest rate cuts.

“While the market narrative is that a recession is inevitable, especially in the U.S., economic data continues to be mixed with seemingly sufficient evidence to support both bulls and bears’ outlook,” said Thomas Poullaouec, head of multi-asset solutions APAC at T. Rowe Price.

“At this point it is difficult to gauge the potential depth and duration of the contraction, leaving us broadly cautious as we keep an eye on data, looking for more direction.”

Asian markets

In Asia, the Shanghai Composite Index eased 0.23 percent. while Hong Kong’s Hang Seng Index slid 0.55 percent, dragged by China data showing a wobbly post-COVID recovery.

https://business.inquirer.net/397841/china-jan-mar-industrial-profit-slump-underlines-slow-economic-recovery

The offshore yuan weakened past 7 per dollar for the first time in five months.

Japan’s Nikkei, however, rose 0.68 percent, scaling above 30,000 for the first time since September, 2021. The index has been on a tear and is up 15 percent this year as foreign investors piled in amid reports billionaire investor Warren Buffett was considering more investment in Japanese stocks.

Data showed on Wednesday that Japan’s economy emerged from recession and grew faster than expected in the first quarter as a post-COVID consumption rebound offset global headwinds.

https://business.inquirer.net/401271/japan-emerges-from-recession-on-post-covid-consumer-rebound

The yen weakened 0.12 percent to 136.55 per dollar, not far from a two-week low of 136.69 touched on Tuesday.

Against a basket of currencies, the dollar rose 0.01% to 102.61, inching closer to the five-week high of 102.75 it touched on Monday.

U.S. crude rose 0.06% to $70.90 per barrel and Brent was at $74.99, up 0.11% on the day. [O/R]

Gold prices held steady after retreating from the key $2,000-an-ounce mark in the previous session. Spot gold was last at $1,991.29 an ounce [GOL/]