Treasuries, US Stock Futures Reflect Debt Progress: Markets Wrap

(Bloomberg) — Treasuries and US stock futures reflected hopes that Congress will pass a debt-accord to head off a default as White House and Republican congressional leaders stepped up lobbying in support of the deal.

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Treasury bills maturing in June rallied as trading resumed Tuesday after the US markets were closed for Memorial Day. More broadly, Treasury yields declined across the curve on debt dated from five years to 30 years.

The dollar, which has benefited from angst around the statutory borrowing limit, was little changed, with an index of greenback sitting comfortably below the two-month high set last week.

Contracts on the S&P 500 and Nasdaq 100 rose 0.2% and 0.4%, respectively, after each making similarly small gains Monday in holiday-thinned trading.

Stocks in Japan fell, Australia’s benchmark was little changed and equities in South Korea advanced. Samsung Electronics Co. and SK Hynix Inc. surged to the highest in more than a year after Morgan Stanley raised price targets for the Korean chipmakers, with SK Hynix its top pick as a key beneficiary of Nvidia Corp.’s AI opportunity.

Contracts for Hong Kong suggest more declines. A key gauge of Chinese shares is within a whisker of a bear market as a wobbling economic recovery, intensifying geopolitical tensions and a weaker yuan kept investors away.

A rebound for Chinese equity benchmarks would require a monetary catalyst or improving ties between Beijing and Washington, in addition to rosier macro data, said Hebe Chen, market analyst for IG. “It’s probably safe to say this reopening has lost its steam,” she said.

Environmentalists, defense hawks and conservative hard-liners have condemned concessions made by President Joe Biden and Republican House Speaker Kevin McCarthy to reach an accord on the debt ceiling. Biden has been personally calling lawmakers to support the bill, which is due to be voted on by the House on Wednesday.

For Federal Reserve policymakers, details of the deal will be another consideration when they meet in June.

“We believe this deal cements a 25 basis point hike at the June 13-14 FOMC meeting. With banking sector stresses fading, a potential default was really the only thing that could have prevented a hike next month,” Win Thin, global head of currency strategy at Brown Brothers Harriman & Co., wrote in a note. “More importantly, rates cuts by year-end are now totally priced out, as they should have been long ago.”

In commodities, oil ticked higher and gold remained near its lowest level since mid-March as demand waned for haven assets following the US debt deal.

Key events this week:

  • Eurozone economic confidence, consumer confidence, Tuesday

  • US consumer confidence, Tuesday

  • Richmond Fed President Thomas Barkin interviewed by NABE as part of monetary policy webinar series, Tuesday

  • China manufacturing PMI, non-manufacturing PMI, Wednesday

  • US job openings, Wednesday

  • Fed issues Beige Book economic survey, Wednesday

  • Philadelphia Fed President Patrick Harker has fireside chat on the global macro-economy and monetary conditions, Wednesday

  • Boston Fed President Susan Collins and Fed Governor Michelle Bowman speak in Boston, Wednesday.

  • ECB issues financial stability review, Wednesday

  • China Caixin manufacturing PMI, Thursday

  • Eurozone HCOB Eurozone Manufacturing PMI, CPI, unemployment, Thursday

  • US construction spending, initial jobless claims, ISM Manufacturing, light vehicle sales, Thursday

  • ECB issues report its May 3-4 monetary policy meeting. ECB President Christine Lagarde speaks at German savings banks conference, Thursday

  • Philadelphia Fed President Patrick Harker speaks on economic outlook at NABE’s webinar, Thursday

  • US unemployment, nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.2% as of 9:43 a.m. Tokyo time. The S&P 500 rose 1.3% on Friday

  • Nasdaq 100 futures rose 0.4%. The Nasdaq 100 rose 2.6%

  • Japan’s Topix index fell 0.7%

  • Australia’s S&P/ASX 200 Index was little changed

  • Hong Kong’s Hang Seng futures fell 0.9%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $1.0717

  • The Japanese yen rose 0.1% to 140.27 per dollar

  • The offshore yuan was little changed at 7.0861 per dollar

  • The Australian dollar was little changed at $0.6536

Cryptocurrencies

  • Bitcoin was little changed at $27,676.59

  • Ether fell 0.3% to $1,887.07

Bonds

  • The yield on 10-year Treasuries declined four basis points to 3.76%

  • Japan’s 10-year yield was little changed at 0.430%

  • Australia’s 10-year yield declined five basis points to 3.65%

Commodities

This story was produced with the assistance of Bloomberg Automation.

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