Hang Seng Index, ASX200, Nikkei 225: US Debt Ceiling Deal Delivers

Key Insights:

• It was a bullish morning, with the ASX 200 and the Nikkei on the bounce.
• Investors responded to news from Washington, with US President Joe Biden and Speaker of the House Kevin McCarthy reaching a debt ceiling deal.
• However, there were no regional economic indicators to influence the morning.

Market Overview

It was a bullish start to the week for the Asian markets. The Nikkei and the ASX 200 led the Hang Seng Index as investors responded to weekend news from Washington.

US President Joe Biden and Speaker of the House Kevin McCarthy reached a deal to avert a US default. The two sides agreed to suspend the $31.4 trillion debt ceiling until January 1, 2025. Congress will vote on the deal this Wednesday.

US economic indicators from Friday weighed on the Hang Seng Index as investors responded to the pickup in US inflationary pressure and the increased chance of a Fed interest rate hike in June.

According to the CME FedWatch Tool, the probability of a June hike increased from 51.7% to 64.2% on Friday.

This morning, there were no economic indicators from the region to draw impact, leaving the Hang Seng Index, ASX 200, and the Nikkei to track the US equity markets into positive territory.

On Friday the NASDAQ Composite Index rallied 2.19%, with the Dow and the S&P 500 seeing gains of 1.00% and 1.30%, respectively.

ASX 200

The ASX 200 was up by 1.02%, with bank and mining stocks on the move.

The big-4 had a bullish morning. The Commonwealth Bank of Australia (CBA) and the National Australia Bank (NAB) were up by 1.20% and 1.18%, respectively, with Westpac Banking Corp (WBC) gaining 1.00%. ANZ Group (ANZ) rose by a more modest 0.89%.

Mining stocks also had a bullish morning. Rio Tinto (RIO) and BHP Group Ltd (BHP) were both up by 1.52%, respectively, with Fortescue Metals Group (FMG) rallying 2.19%. Newcrest Mining (NCM) rose by 0.08%.

Oil stocks tracked the broader market. Woodside Energy Group (WDS) and Santos Ltd (STO) rose by 1.38% and 1.54%, respectively. Brent Crude was up 0.79% to $77.56 this morning.

Hang Seng Index

The Hang Seng was up 0.29% this morning. While investors responded to the news of a debt ceiling deal, the prospects of a more hawkish Fed interest rate trajectory capped the upside.

Considering the main components, Tencent Holdings Ltd (HK:0700) and Alibaba Group Holding Ltd (HK:9988) saw gains of 1.49% and 0.38%, respectively.

Bank stocks had a mixed morning session. HSBC Holdings PLC rose by 0.51%, while the Industrial and Commercial Bank of China (HK:1398) was down by 0.24%. China Construction Bank (HK: 0939) was flat in early trading.

CNOOC (HK: 0883) was down 0.48%.

Nikkei 225

The Nikkei 225 was up 1.61% this morning, with a stronger USD/JPY providing support.

Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group rose by 2.23% and 1.74%, respectively.

Looking at the main components, SoftBank Group Corp. (9984) and Tokyo Electron Limited (8035) led the way, rallying 2.71% and 2.11%, respectively. Fast Retailing Co (9983) and KDDI Corp (9433) were up by 0.76% and 0.65%, respectively, with Sony Corp (6758) gaining 0.56%.

Check out our economic calendar for economic events.