Opening Call: The Australian share market is to open higher.
U.S. stocks closed higher, Treasury yields jumped and crude-oil prices gained on optimism about a U.S. debt-ceiling deal. The WSJ Dollar Index rose, while gold’s recent rally continued to unravel.
Elsewhere, Australia’s S&P/ASX 200 closed 0.5% lower amid losses in shares of the country’s heavyweight banks and miners. Data showed wages grew by slightly less than expected in the first quarter.
Stocks closed higher after President Biden expressed optimism about debt-ceiling talks and said he’s confident a default will be avoided. The Dow Jones Industrial Average rose 1.2%, the S&P 500 also gained 1.2%, and the Nasdaq Composite Index advanced 1.3%. Biden said that talks with Republicans have been productive and that he believes an unprecedented U.S. default will be avoided. Regional-bank shares jumped after Western Alliance – a lender investors have worried about – gave a positive update on deposit growth.
Those two headlines put traders in bullish spirits, said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management. “One of the economic headwinds is supposedly coming off, and the banking system appears a bit more solvent, and that’s causing people to buy,” Schutte said, adding that his team remains concerned that a recession is approaching.
Investors are “increasingly hopeful there will be a resolution in U.S. debt talks, while forecast of a tighter oil market in the second half of the year is also helping to keep the bulls happy,” said Fawad Razaqzada, market analyst at StoneX. Gold prices finished at their lowest since late March as the yellow metal’s recent rally continued to unravel. June gold declined by 0.4% to settle at $1,984.90 per ounce on Comex. The settlement was the lowest for a most-active contract since March 29, according to Dow Jones Market Data. “The correction in gold has scope to continue if the odds of another (Federal Reserve) hike next month keep rising or rate-cut bets cool further,” said Marios Hadjikyriacos, senior investment analyst at XM.
Oil futures ended ended at their highest in more than a week, with prices finding support as comments from President Biden fueled expectations that the U.S. will reach a deal on the debt ceiling – easing worries about the nation’s economy. West Texas Intermediate crude for June delivery rose 2.8% to settle at $72.83 a barrel on the New York Mercantile Exchange. July Brent crude, the global benchmark, added 2.7% at $76.96 a barrel on ICE Futures Europe.
In Asian trading, Japan’s Nikkei Stock Average ended 0.8% higher, closing above the 30000 threshold for the first time since September 2021. Chip-related stocks led the day’s gains, driven by hopes for earnings growth and a weaker yen. Chinese shares closed mixed, with sentiment weighed by China’s disappointing April economic data, which sparked concerns that the country’s post-Covid recovery is losing steam. Factory activity also disappointed, falling 0.5% last month compared with March, reflecting softening export demand. The Shanghai Composite Index ended 0.2% lower, the Shenzhen Composite Index ended 0.3% higher, and the ChiNext Price Index ended flat.