
Asian stocks climb as investors weigh US debt, trade and rate decisions
Dollar drifts as selloff in Treasuries ease
Eyes on RBA policy decision; rate cut expected
SINGAPORE, May 20 — Asian stocks rose today while US Treasury yields steadied allowing a bit of a breathing room for the US dollar as investors took stock of the debt load of the world's biggest economy and awaited trade deals.
Moody's downgrade of its rating for US sovereign credit last week — due to concerns about that nation's growing US$36 trillion (RM154 trillion) debt pile — led to a selloff in Treasuries yesterday but that stabilised by Asian trading hours today.
'The Moody's downgrade was a temporary shock and rather meaningless in the bigger picture,' said Kyle Rodda, senior financial market analyst at Capital.com.
'But then we're not really being fed any kind of fresh new news for investors to buy into... We haven't gotten any new deals coming through.'
With little indication of trade deals on the way, markets are struggling for direction, analysts said.
The 30-year bond yield was 3.5 basis points lower at 4.906 per cent after hitting an 18-month high of 5.037 per cent in the previous trading session. Major US stock indexes recovered from early loss to end mostly flat.
That left the MSCI's broadest index of Asia-Pacific shares outside Japan 0.36 per cent higher, hovering near the seven-month high touched last week. Japan's Nikkei gained 0.65 per cent in early trade.
Chinese stocks were steady at the open after the local central bank cut benchmark lending rates for the first time since October, while five of China's biggest state-owned banks also lowered deposit interest rates.
The blue-chip index was 0.15 per cent higher whereas Hong Kong's Hang Seng Index rose 1 per cent.
US Federal Reserve officials took on cautiously the ramifications of the Moody's downgrade and unsettled market conditions as they continued to navigate an uncertain economic environment in the wake of erratic US trade action.
While not an imminent issue for the Fed, higher borrowing costs tied to a deteriorating US financial position could make credit generally more expensive and create restraint on economic activity.
Traders have priced in two interest rate cuts from the US central bank this year, versus four last month when President Donald Trump's tariff salvos upended markets and led to investors exiting US assets.
'For now, US exceptionalism and corporate resilience are offsetting the risks,' said Charu Chanana, chief investment strategist at Saxo in Singapore.
'But how long before investors start demanding a higher risk premium, especially with the Fed in wait-and-see mode and trade talks seemingly stalling?'
Markets will be monitoring a US congressional debate over a tax bill later in the day at which Trump is widely expected to be present ahead of a vote on the legislation later this week.
The measure would extend Trump's 2017 tax cuts and potentially add US$3 trillion to US$5 trillion to national debt over the next decade.
Investors will also watch out for a policy decision from the Reserve Bank of Australia, with cuts to interest rates widely expected. The Australian dollar was a tad weaker at US$0.64485.
In commodities, oil prices were mixed as investors contended with a potential breakdown in talks between the US and Iran over the latter's nuclear activity and weakened prospects of more Iranian supply entering the market. — Reuters
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The Star
an hour ago
- The Star
Brazil investors warn of political impact of US tariffs in election
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Free Malaysia Today
an hour ago
- Free Malaysia Today
EU, US strike ‘biggest-ever' trade deal
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New Straits Times
an hour ago
- New Straits Times
US, China to resume tariff talks in effort to extend truce
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That deal struck with European Commission President Ursula von der Leyen on Sunday in Scotland also calls for $600 billion in investments in the US by the EU, Trump told reporters. No similar breakthrough is expected in the US-China talks, but trade analysts said that another 90-day extension of a tariff and export control truce struck in mid-May was likely. An extension of that length would prevent further escalation and help create conditions for a potential meeting between Trump and Chinese President Xi Jinping in late October or early November. Spokespersons for the White House and US Trade Representative's office did not immediately respond to requests for comment on a South China Morning Post report quoting unnamed sources as saying the two sides would refrain from introducing new tariffs or take other steps that could escalate the trade war for another 90 days. Trump's administration is poised to impose new sectoral tariffs that will impact China, including on semiconductors, pharmaceuticals, ship-to-shore cranes and other products. "We're very close to a deal with China. We really sort of made a deal with China, but we'll see how that goes," Trump told reporters before his meeting with von der Leyen, providing no further details. DEEPER ISSUES Previous US-China trade talks in Geneva and London in May and June focused on bringing US and Chinese retaliatory tariffs down from triple-digit levels and restoring the flow of rare earth minerals halted by China and Nvidia's H20 AI chips and other goods halted by the United States. So far, the talks have not delved into broader economic issues. They include US complaints that China's state-led, export-driven model is flooding world markets with cheap goods, and Beijing's complaints that US national security export controls on tech goods seek to stunt Chinese growth. "Stockholm will be the first meaningful round of US-China trade talks," said Bo Zhengyuan, Shanghai-based partner at China consultancy firm Plenum. Trump has been successful in pressuring some other trading partners, including Japan, Vietnam and the Philippines, into deals accepting higher US tariffs of 15 per cent to 20 per cent. Analysts say the US-China negotiations are far more complex and will require more time. China's grip on the global market for rare earth minerals and magnets, used in everything from military hardware to car windshield wiper motors, has proved to be an effective leverage point on US industries. TRUMP-XI MEETING? In the background of the talks is speculation about a possible meeting between Trump and Xi in late October. Trump has said he will decide soon whether to visit China in a landmark trip to address trade and security tensions. A new flare-up of tariffs and export controls would likely derail any plans for a meeting with Xi. "The Stockholm meeting is an opportunity to start laying the groundwork for a Trump visit to China," said Wendy Cutler, vice president at the Asia Society Policy Institute. Bessent has already said he wants to work out an extension of the August 12 deadline to prevent tariffs snapping back to 145 per cent on the US side and 125 per cent on the Chinese side. Still, China will likely request a reduction of multi-layered US tariffs totaling 55 per cent on most goods and further easing of US high-tech export controls, analysts said. Beijing has argued that such purchases would help reduce the US trade deficit with China, which reached $295.5 billion in 2024. China is currently facing a 20 per cent tariff related to the US fentanyl crisis, a 10 per cent reciprocal tariff, and 25 per cent duties on most industrial goods imposed during Trump's first term. Bessent has also said he would discuss with He the need for China to rebalance its economy away from exports toward domestic consumer demand. The shift would require China to put an end to a protracted property crisis and boost social safety nets to encourage household spending. Michael Froman, a former US trade representative during Barack Obama's administration, said such a shift has been a goal of US policymakers for two decades. "Can we effectively use tariffs to get China to fundamentally change their economic strategy? That remains to be seen," said Froman, now president of the Council on Foreign Relations think tank.