US Debt Ceiling Deal: Asian Stock Markets Trade Mixed Ahead of US Congress Vote
Key Highlights :
Asian stock markets traded mixed on Tuesday as investors kept an eye on the US Congress vote on the tentative US debt ceiling deal. President Joe Biden and House Speaker Leader Kevin McCarthy reached a deal over the weekend to raise the United States’ $31.4 trillion debt ceiling and avert a debt default. The US Congress is likely to vote on the legislation on Wednesday, but some of the Republican lawmakers are said to oppose the bill, signaling that its passage would not be easy before the US runs out of money.
The US stock futures gained in the early Asian trade, while the stocks in Asian-Pacific region traded mixed. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4%. In Japan, the Nikkei 225 traded 0.35% lower, while the Topix fell 0.63%. China’s Shanghai Composite Index traded flat. South Korea’s Kospi rallied nearly 1%, while Hong Kong's Hang Seng Index climbed 0.31%. The SGX Nifty was trading 0.08% higher at 18,705, indicating a flat start for the Indian markets.
The US markets were closed on Monday on the occasion of Memorial Day. European shares fell on Monday on losses in technology and bank stocks. The pan-European STOXX 600 index ended 0.1% lower. Germany’s DAX fell 0.2% at 15,952.73. France’s CAC 40 declined 0.2% at 7,303.81 points.
The US debt ceiling deal reached between President Joe Biden and House Speaker Leader Kevin McCarthy over the weekend is likely to avert a debt default. The deal proposes to raise the US debt ceiling by $1.9 trillion and suspend it until 2025. The US Congress is likely to vote on the legislation on Wednesday, but some of the Republican lawmakers are said to oppose the bill, signaling that its passage would not be easy before the US runs out of money.
The US debt ceiling is the maximum amount of money the government is allowed to borrow. When the debt ceiling is reached, the government is unable to borrow any more money to finance its operations and is forced to default on its debt payments. This would have serious negative consequences for the US economy and global markets.
The US debt ceiling has been raised several times in the past to prevent a debt default. This time, however, the situation is complicated by the fact that the US government has already borrowed a large amount of money to fund the economic relief package passed last year to help the economy recover from the coronavirus pandemic.
The current debt ceiling deal is expected to provide some relief to the US government, but it is still uncertain if it will be enough to prevent a debt default. In the meantime, investors are closely monitoring the developments and are likely to remain cautious until the final vote is taken.
Gold prices traded flat, hovering around a two-month low, as optimism over a US debt ceiling deal dented the yellow metal’s safe haven appeal. The spot gold traded flat at $1,942.16 per ounce, while the US gold futures eased 0.1% to $1,941.80.
The US dollar fell against a basket of major currencies as the US debt ceiling deal improved risk sentiment. The dollar index, which measures the US currency against six major peers, eased 0.125% to 104.17, still hovering near its two-month high of 104.42. The euro gained 0.09% to $1.0715, while sterling was traded 0.11% higher at $1.2365. The yen strengthened 0.28% to 140.06 per dollar. It touched a six-month low of 140.91 per dollar on Monday.
Longer-dated US Treasuries rallied in Asia on the back of a deal to suspend the US debt ceiling until 2025, and avert a debt default. The bill is likely to pass. The benchmark 10-year yields dropped 6 basis points at the open of trade in Tokyo to 3.7596%. Thirty-year yields fell 5.5 bps to 3.9207%, Reuters reported.
Crude oil prices traded higher as investors monitored the progress on the US debt ceiling deal to avert a default. US West Texas Intermediate futures rose 0.19% to $72.81 a barrel, while Brent oil eased 0.16% to $76.95 per barrel.
Asian stock markets are trading mixed ahead of the US Congress vote on the tentative US debt ceiling deal. President Joe Biden and House Speaker Leader Kevin McCarthy reached a deal over the weekend to raise the United States’ $31.4 trillion debt ceiling and avert a debt default. The US Congress is likely to vote on the legislation on Wednesday, but some of the Republican lawmakers are said to oppose the bill, signaling that its passage would not be easy before the US runs out of money. Investors are closely monitoring the developments and are likely to remain cautious until the final vote is taken.
