Asian markets mixed as US government debt talks push to brink of default

Asian markets mostly rose on Friday amid signs that Congress could reach a deal on U.S. government debt that would prevent a potentially calamitous default.

US futures and oil prices also advanced.

President Joe Biden and House Speaker Kevin McCarthy were closing in on a two-year budget deal that could unlock a vote to lift the national debt ceiling. The Democratic president and the Republican president hope to find a budget compromise this weekend.

Both Biden and McCarthy expressed optimism heading into the weekend that the gap between their positions could be closed. A two-year deal would raise the debt ceiling for that period, after the 2024 presidential election. As a price for raising the statutory debt ceiling, Republicans have demanded spending cuts that Democrats oppose.

Markets swirled due to a variety of factors and on Thursday, enthusiasm for artificial intelligence pushed stock prices higher despite the potential crisis brewing in Washington.

This spilled over to Asia, where Tokyo’s Nikkei 225 gained 0.7% to 31,019.61. In Seoul, the Kospi climbed 0.2% to 2,558.81, helped by a 2.2% rise in the share price of Samsung Electronics, South Korea’s largest company.

The Shanghai Composite added 0.4% to 3,212.50, while the S&P/ASX 200 in Sydney also rose 0.2% to 7,154.80.

The S&P 500 rebounded 0.9% to 4,151.28 on Thursday after chipmaker Nvidia gave a monster forecast for upcoming sales as it benefits from the tech world’s rush to AI.

The Nasdaq jumped 1.7% to 12,698.09, while the Dow Jones Industrial Average slipped 0.1% to 32,764.65.

Because it is one of Wall Street’s most valuable stocks, Nvidia’s 24.4% rise was the strongest force pushing up on the S&P 500. Its forecast of around $11 billion in revenue for the current quarter beat analysts’ expectations for less than $7.2 billion. Nvidia’s stock has already more than doubled this year and its total value is approaching $1 trillion.

Shares of other chipmakers also rose after Nvidia described a race by its customers to put AI “into every product, service and business process”. Advanced Micro Devices gained 11.2%.

Some other Big Tech stocks rallied, adding to recent gains fueled by AI enthusiasm. The field has become so hot that critics are warning of a possible bubble, while proponents say it could be the last revolution to reshape the global economy. Microsoft gained 3.8% and Google’s parent company Alphabet rose 2.1%.

“While no one is questioning the potential of AI, valuations seem to have gotten ahead and it may soon be time to correct,” Swissquote’s Ipek Ozkardeskaya said in a commentary.

The majority of stocks fell on fears that Washington will run out of cash to pay its bills as early as June 1 unless Congress allows it to borrow more.

The widespread expectation is for compromise before it is too late, as has happened dozens of times before, because failure would likely be terrible for the economy.

Fitch said late Wednesday that it may downgrade the US government’s “AAA” credit rating. He said he still expects a resolution before the US Treasury runs out of cash, but he sees the risk of error growing.

A report indicates that fewer workers applied for unemployment benefits last week than expected, suggesting the labor market remains strong even as manufacturing, housing and other sectors of the economy slow under the weight of much higher interest rates.

Another report estimated that the US economy grew at an annual rate of 1.3% in the first three months of the year, stronger than the 1.1% previously forecast. This reassures that the economy will not fall into recession. But that could lead the Federal Reserve to raise interest rates again next month. Rates have been raised rapidly over the past year, helping to slow inflation from its peak last summer, but they are slowing the economy as a whole and weighing on commodity prices. stocks, bonds and other investments.

In other trading, the benchmark U.S. crude reversed an early decline, gaining 20 cents to $72.03 a barrel in electronic trading on the New York Mercantile Exchange. It fell $2.51 on Thursday to $71.83 a barrel.

Brent, the international standard, rose 11 cents to $76.29 a barrel.

The US dollar fell to 139.74 Japanese yen from 140.07 yen. The euro fell from $1.0726 to $1.0732.

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