# Stocks surge in Asia as US averts default, Fed pause bets rise
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-06-02
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Asian Stocks Surge as US Averts Default
Meta Description: Asian stocks soar as Senate avoids US default with debt ceiling lift and Fed hints at rate pause, boosting hopes for economic recovery and market resilience.
URL: https://financedigest.com/stocks-surge-in-asia-as-us-averts-default-fed-pause-bets-risehtml

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# Stocks surge in Asia as US averts default, Fed pause bets rise

By Ankur Banerjee

SINGAPORE (Reuters) – Asian stocks jumped on Friday on increasing expectations that the Federal Reserve might stand still on rates and after the U.S. Senate passed legislation lifting the government’s $31.4 trillion [debt ceiling](https://www.financedigest.com/dollar-eases-before-inflation-data-with-nagging-worries-over-debt-ceiling-impasse.html "Dollar eases before inflation data, with nagging worries over debt ceiling impasse"), avoiding a catastrophic default.

MSCI’s broadest index of Asia-Pacific shares outside Japan surged 2% and was on course for its [biggest one-day percentage gain since](https://www.financedigest.com/dollar-steadies-near-16-week-low-yuan-set-for-biggest-weekly-gain-since-2005.html "Dollar steadies near 16-week low, yuan set for biggest weekly gain since 2005") early January.

The exuberant mood looked [set to continue in Europe](https://www.financedigest.com/factbox-europes-travel-disruption-set-to-continue-as-summer-ends.html "Factbox-Europe’s travel disruption set to continue as summer ends"), with Eurostoxx 50 futures up 0.45%, German DAX futures up 0.49% and FTSE futures 0.18% higher. E-mini futures for the S&P 500 rose 0.20%.

The Senate voted 63-36 to approve the [bill that was passed on Wednesday by the House](https://www.financedigest.com/dollar-rises-as-u-s-debt-bill-passes-house-euro-slides-ahead-of-inflation.html "Dollar rises as U.S. debt bill passes House, euro slides ahead of inflation") of Representatives, as lawmakers raced against the clock to avert what would have been a first-ever default. The Treasury Department had warned it would be unable to [pay all its bills](https://www.financedigest.com/generation-y-relying-on-friends-and-family-to-pay-their-energy-bills.html "Generation Y relying on friends and family to pay their energy bills") on June 5 if Congress failed to act.

I think it’s a bit of relief but that’s about it,” said Shane Oliver, head of [investment strategy](https://www.financedigest.com/the-top-strategies-for-investing-in-the-defense-industry.html "The Top Strategies for Investing in the Defense Industry") at AMP in Sydney. I think it’s now time for [markets to move on to other things.”](https://www.financedigest.com/on-demand-healthcare-to-be-the-new-thing-in-the-frozen-pastries-market.html "On-Demand Healthcare To Be The New Thing In The Frozen Pastries Market")

Also lifting [risk sentiment](https://www.financedigest.com/dollar-soft-as-china-reopening-hopes-boost-risk-sentiment.html "Dollar soft as China reopening hopes boost risk sentiment") was changing expectations of the Fed’s monetary policy, with traders steadily dialling back their bets on the central bank raising interest rates again this month.

Markets are now pricing in a 20% chance of the [central bank hiking](https://www.financedigest.com/marketmind-rba-shock-hike-starts-huge-week-for-central-banks.html "Marketmind: RBA shock hike starts huge week for central banks") by 25 basis points (bps) compared to a 50% chance a week earlier, according to the CME FedWatch tool.

Data overnight showed the number of Americans filing new claims for unemployment benefits increased modestly last week and private employers hired more workers than expected in May, pointing to [continued labour market](https://www.financedigest.com/taylor-wimpey-espana-celebrates-double-operating-profit-for-2016-as-spanish-market-continues-to-soar.html "Taylor Wimpey España celebrates double operating profit for 2016 as Spanish market continues to soar") tightness.

The [market’s focus is shifting to the economic](https://www.financedigest.com/the-impact-of-economic-indicators-on-financial-markets-understanding-the-key-drivers.html "The Impact of Economic Indicators on Financial Markets: Understanding the Key Drivers") front and Fed’s decision on rates now,” said Tina Teng, markets analysts at CMC Markets.

The spotlight will be on the Labor Department’s [closely watched](https://www.financedigest.com/finland-watching-its-waters-closely-after-gas-pipeline-blasts-pm-says.html "Finland watching its waters closely after gas pipeline blasts, PM says") unemployment report for May, due later on Friday. The data will help determine whether the [Fed sticks with its aggressive rate hikes](https://www.financedigest.com/dollar-bounces-as-fed-seen-keeping-up-aggressive-rate-hikes.html "Dollar bounces as Fed seen keeping up aggressive rate hikes").

Dovish comments from [Fed officials through the week have helped embolden Fed pause](https://www.financedigest.com/asia-shares-lifted-by-fed-pause-bets-china-real-estate-retreats.html "Asia shares lifted by Fed pause bets; China real estate retreats") hopes, with Philadelphia Federal Reserve President Patrick Harker saying U.S. [central bankers should not raise rates](https://www.financedigest.com/czech-central-bank-vice-gov-unlikely-to-vote-for-rate-cut-newspaper.html "Czech central bank vice-gov unlikely to vote for rate cut -newspaper") at their next meeting.

It’s [time to at least hit](https://www.financedigest.com/coca-cola-hbc-flags-one-time-195-million-hit-from-russian-operations.html "Coca-Cola HBC flags one-time 5 million hit from Russian operations") the stop button for one meeting and see how it goes,” Harker said.

AMP’s Oliver said the prevailing sentiment now is that there will be a pause in June and that’s helped markets. “If the payroll numbers are on the high side, it will cause the market to question whether there’ll be a pause or not.”

[China shares](https://www.financedigest.com/shares-mixed-on-fed-warning-china-acts-on-property.html "Shares mixed on Fed warning, China acts on property"), which have been dragged lower in past few weeks by worries over a sputtering post-pandemic economic recovery, also surged. The Shanghai Composite Index was up 0.76% while [Hong Kong’s](https://www.financedigest.com/evergrande-winding-up-lawsuit-in-hong-kong-adjourned-to-nov-7.html "Evergrande winding-up lawsuit in Hong Kong adjourned to Nov 7") Hang Seng index spiked 3.6% higher, set for its best day in three months.

Australia’s S&P/ASX 200 index rose 0.42%, while Japan’s Nikkei was 1% higher, continuing its hot run.

U.S. [Treasury yields](https://www.financedigest.com/world-equities-fall-u-s-treasury-yields-rise-after-hawkish-fed.html "World equities fall, U.S. Treasury yields rise after hawkish Fed") fell. In Asian hours, the two-year U.S. [Treasury yield](https://www.financedigest.com/wall-st-ends-lower-treasury-yields-slide-as-data-fuels-recession-jitters.html "Wall St ends lower, Treasury yields slide as data fuels recession jitters"), which typically moves in step with interest rate expectations, was up 0.8 bps at 4.349%, having slipped around 5 bps on Thursday.

In the currency market, the dollar index, which measures the U.S. currency against six major peers, was flat after dropping 0.6% overnight.

The Japanese [yen weakened 0.11% to 138.93 per dollar](https://www.financedigest.com/dollar-hits-20-yr-high-as-yen-tumbles-on-dovish-bank-of-japan.html "Dollar hits 20-yr high as yen tumbles on dovish Bank of Japan"), while Sterling was last trading at $1.2527, up 0.02% on the day.

The Aussie rose as much as 0.61% to $0.6613, its strongest since May 24. The primary driver was an announcement by Australia’s independent wage-setting body that it would raise the minimum wage by 5.75% from July 1.

The bullish sentiment helped [push oil prices higher](https://www.financedigest.com/wall-street-pushes-stocks-oil-higher-on-promising-data.html "Wall Street pushes stocks, oil higher on promising data"), with U.S. crude up 0.53% to $70.47 per barrel and Brent at $74.67, up 0.53% on the day. Markets are also weighing the likelihood of price-supportive OPEC+ [production cuts](https://www.financedigest.com/apple-plans-to-cut-iphone-14-production-lag-between-china-india-bloomberg.html "Apple plans to cut iPhone 14 production lag between China, India – Bloomberg") over the weekend.

(Reporting by Ankur Banerjee; Editing by Lincoln Feast and Kim Coghill)


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