Stock market today: Asian equities are largely up despite concerns over US debt talks

TOKYO (AP) Asian stocks rallied mostly higher Monday as investors worried whether the United States government would be able to reach a deal to avoid federal bankruptcy.

The Japanese benchmark Nikkei 225 gained 0.9% to close at 31,086.82. The Australian S&P/ASX 200 fell 0.2% to 7,263.30. The South Korean Kospi won 0.7% to 2,554.97. The Hong Kong Hang Seng rose 1.7% to 19,779.38, while the Shanghai Composite rose 0.4% to 3,295.07.

Markets are closely monitoring a crucial meeting to take place later today at the White House between President Joe Biden and House Speaker Kevin McCarthy on the debt ceiling. A default on US debt would almost certainly trigger a recession in the US economy, which would have damaging consequences for global economies.

It seems quite likely that a full deal will be reached before early June, but the timing is hard to predict, Stephen Innes, managing partner at SPI Asset Management, said of the US’s efforts to avoid a potentially disastrous bankruptcy of their avoid guilt.

While bargaining strategy and political incentives imply a last-minute deal, we’ll soon find out whether it’s baked beans or lobster over the Memorial Day holiday.

Machine order data in Japan for March, released Monday, pointed to a slowdown in the world’s third-largest economy, with the leading indicator falling 3.9% for its second straight month of declines. But analysts think a recovery is on the way this quarter as domestic production gradually recovers from the various negative effects of the pandemic.

Wall Street closed lower last week. The S&P 500 fell 6.07 points, or 0.1%, to 4,191.98. The Dow Jones Industrial Average fell 109.28, or 0.3%, to 33,426.63, while the Nasdaq index dropped 30.94, or 0.2%, to 12,657.90.

The White House and House Republicans have completed a new round of talks during the weekend.

Washington must negotiate a budget compromise along with a deal to raise the country’s borrowing limit to avoid a federal default. Democrats and Republicans face a deadline of June 1, the date by which the U.S. government could run out of money to pay its bills unless Congress allows it to borrow more.

On the upside, US Federal Reserve Chairman Jerome Powell made comments Friday to indicate that the Fed can leave interest rates alone at its next meeting in June.

After Powell spoke, government bond yields gave up some of their gains from earlier in the day as traders reversed their bets on another rate hike by the Fed in June.

The yield on the 10-year Treasury rose from 3.65% at the end of Thursday to 3.69%. That return helps determine rates for mortgages and other important loans.

Two-year Treasury yields, which move more based on expectations for Fed action, climbed to 4.33% before Powell spoke. It later fell back to 4.25% from 4.26% at the end of Thursday.

Most companies in the S&P 500 reported higher earnings than analysts had expected for the start of the year. But they are still on track to report profit declines from a year ago level for the second consecutive quarter.

In energy trading, US benchmark crude lost $1.00 to $70.55 a barrel. Brent oil, the international standard, fell 88 cents to $74.70 a barrel.

In currency trading, the US dollar was unchanged at 137.88 Japanese yen. The euro was priced at $1.0820, up from $1.0808.

___

AP Business Writer Stan Choe contributed from New York.

Yuri Kageyama is on Twitter: https://twitter.com/yurikageyama