Asian stocks rise as debt pullback fears boost Wall Street rally
Asian stocks rose on Thursday, following a rally on Wall Street after signs of progress on resolving the congressional deadlock over the debt ceiling.
Japan’s benchmark Nikkei 225 gained 1.6% in morning trading to 27,972.58. The Australian S & P / ASX 200 added 0.8% to 7,262.30. South Korea’s Kospi jumped 1.3% to 2,944.57. Hong Kong’s Hang Seng jumped 2.2% to 24,491.36. The trade was closed in Shanghai for a Chinese national holiday.
Stephen Schwartz, senior director of Fitch, said he believes the regional economy will start to recover with growing vaccination efforts in Asia, which means restrictions to curb the spread of the coronavirus will be lifted.
But South and Southeast Asia, where vaccination deployment has been delayed, remains vulnerable to the âpandemic setbacksâ of COVID-19. The recent problems in China’s real estate sector are another risk, he added.
âThe slowdown in growth in China, along with the expected reduction from the US Fed, could have broader negative repercussions, especially for emerging and frontier markets in the region,â he said.
Japan’s economic outlook also remains bleak as new Prime Minister Fumio Kishida delivers his first political speech later this week. Although he has promised to raise revenues, he did not give details and is not widely seen as a supporter of the regulatory and structural changes that analysts have long said Japan badly needed. Some skeptics fear that any new spending will only push the country into further debt.
Kishida also scared off investors by voicing his support for a capital gains tax.
In the United States, investors are hoping Congress can manage to temporarily extend the federal government’s debt ceiling and give lawmakers time to reach a more permanent resolution. The market recovered from a morning loss shortly after Republican Senate Leader Mitch McConnell offered Democrats a short-term emergency extension of the federal debt ceiling until December.
Financial markets have mostly taken the debt ceiling drama in stride, expecting another 11-hour fix, but some voices on Wall Street have recently warned investors to prepare for a default even though unlikely, given how extremely damaging this would be to the economy. and markets.
âPeople were worried about the debt ceiling,â said Jay Hatfield, CEO of Infrastructure Capital Advisors.
The S&P 500 rose 0.4% to 4,363.55. Gains in tech stocks, houseware makers and communications companies helped offset losses in energy and other sectors. About 57% of stocks in the index rose.
The Dow Jones Industrial Average rose 0.3% to 34,416.99. The Nasdaq gained 0.5% to 14,501.91. The technology-heavy index fell 1.2% before the afternoon rally.
Small company stocks, a sign of confidence in economic growth, fell: the Russell 2000 index fell 0.6% to 2,215.
If the country’s debt ceiling, which caps the amount of money the federal government can borrow, is not raised by October 18, the country “would likely face a financial crisis and economic recession.” Treasury Secretary Janet Yellen told Congress last week.
In a meeting Wednesday with bank executives, President Biden stressed the importance for Congress of raising the debt ceiling.
âWe have not failed to do so since our inception as a country. We need to act. These leaders know we have to act.
The Senate went on recess Wednesday night so lawmakers could discuss McConnell’s proposal, delaying a procedural vote on a bill passed by the House to suspend the debt ceiling.
The latest episode of market volatility comes as investors question the way forward for the economy, amid rising inflation and the continuing impact of the virus pandemic. Bond yields have remained relatively stable since a sharp rise at the end of last month that signaled fears that high inflation might persist longer than economists and investors initially expected.
At the top of Wall Street’s list of concerns is the Federal Reserve’s timetable for raising interest rates. The Fed’s policy-making committee recently signaled that the central bank may start raising rates at the end of next year. Analysts said the Fed could act sooner than expected if high inflation persists.
Investors will take a closer look at how companies perform in the third quarter when quarterly financial results are released in the coming weeks. Wall Street expects strong earnings growth of 27% for S&P 500 companies, but will also be listening to comments on how supply chain issues and higher costs are hampering operations.
On Friday, the Ministry of Labor will release its report on employment scheduled for September. The labor market has been slow to fully recover from the pandemic, and the summer upsurge in COVID-19 cases has further hampered its progress.
In energy trading, benchmark US crude slipped 45 cents to $ 76.98 a barrel in electronic trading on the New York Mercantile Exchange. It sold $ 1.50 to $ 77.43 a barrel. Brent crude, the international standard, fell 21 cents to $ 80.87 a barrel.
In currency trading, the US dollar rose from 111.40 yen to $ 111.45. The euro was little changed at $ 1.1557.