Stocks set to rise amid US debt-ceiling progress

Stocks set to rise amid US debt-ceiling progress
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(Oct 7): Asian stocks look set to climb early Thursday after progress on the U.S. debt-ceiling impasse lifted equities on Wall Street. The dollar remained higher and Treasuries were steady as traders await key American jobs data.

Futures rose for Japan, Australia and Hong Kong, while U.S. contracts also advanced. The S&P 500 and Nasdaq 100 erased losses of more than 1% to close with gains on a possible deal to boost the debt ceiling into December. That would alleviate the immediate risk of a default but leave the political fight simmering in Washington.

The yield on the U.S. 10-year Treasury note was little changed. Investors are continuing to weigh the economic recovery against inflation risks from a jump in energy costs. ADP employment data beat expectations and a robust U.S. nonfarm payrolls report Friday could cement predictions of a reduction in Federal Reserve stimulus starting next month.

Investors remain on edge as they grapple with a panoply of risks, including monetary-policy tightening to tackle price pressures and the impact on Chinese growth of Beijing’s curbs on a debt-laden property sector. The global energy crunch is also unsettling markets: natural gas prices -- up as much as 40% at one point -- turned lower after Russia’s President Vladimir Putin said the country is ready to help.

“We have several things that we are watching right now -- certainly the debt ceiling is one of them and that’s been contributing to the recent volatility,” Tracie McMillion, head of global asset allocation strategy at Wells Fargo Investment Institute, said on Bloomberg Television. “But we look for these 5% corrections to add money to the equity markets.”

On the geopolitical front, President Joe Biden plans to meet virtually with Chinese President Xi Jinping before the end of the year. U.S. Secretary of State Antony Blinken criticized China’s recent military maneuvers around Taiwan. Pressed on the financial woes of Chinese property developer China Evergrande Group, Blinken said the U.S. is looking to China “to act responsibly and to deal effectively with any challenges.”

Crude oil retreated from a seven-year high in the wake of growing U.S. inventories and after Russia’s signal. In cryptocurrencies, Bitcoin jumped above US$55,000. Chinese markets are shut for a holiday and will reopen on Friday.

Here are some events to watch this week:

  • Reserve Bank of India monetary policy decision on Friday
  • The U.S. Labor Department releases unemployment and job creation data Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.2% as of 7:27 a.m. in Tokyo. The S&P 500 rose 0.4%
  • Nasdaq 100 futures increased 0.2%. The Nasdaq 100 rose 0.6%
  • Nikkei 225 futures rose 0.6%
  • Australia’s S&P/ASX 200 Index futures added 0.5%
  • Hang Seng Index futures rose 0.6%

Currencies

  • The Japanese yen was little changed at 111.42 per dollar
  • The offshore yuan was at 6.4550 per dollar
  • The Bloomberg Dollar Spot Index was little changed
  • The euro traded at US$1.1555

Bonds

  • The yield on 10-year Treasuries was little changed at 1.52%
  • Australia’s 10-year bond yield fell about three basis points to 1.58%

Commodities

  • West Texas Intermediate crude fell 0.5% to US$77.03 a barrel
  • Gold was at US$1,763.07 an ounce