Asian stocks climb as U.S. avoids default, Fed pause bets strengthen. After the U.S. Senate lifted the $31.4 trillion debt ceiling, Asian equities rose on Friday.

MSCI’s broadest index of Asia-Pacific equities outside Japan (.MIAPJ0000PUS) gained 2%, its greatest one-day percentage rise since early January.
Eurostoxx 50 futures rose 0.45%, German DAX futures 0.49%, and FTSE futures 0.18%, indicating continued optimism in Europe. S&P 500 e-minis climbed 0.20%.

As lawmakers scrambled to avoid a first-ever default, the Senate approved the House bill 63-36 on Wednesday. If Congress did not act, the Treasury Department could not pay its debts on June 5.

“I think it’s a bit of relief but that’s about it,” said Shane Oliver, AMP’s Sydney investment strategy head. “Markets should move on.”
The Fed’s monetary policy, with traders gradually reducing their bets for a rate hike this month, also lifted risk sentiment.

According to the CME FedWatch tool, markets now expect a 20% possibility of a 25-bps central bank hike, down from 50% a week ago.

Overnight data indicated that the number of Americans filing new unemployment claims grew slightly last week; private companies hired more workers than expected in May, indicating sustained tightness in the labor market.

“The market’s focus is shifting to the economic front and Fed’s decision on rates now,” said CMC Markets analyst Tina Teng.

Friday’s Labor Department May unemployment report will be widely monitored. Data will determine if the Fed maintains aggressive rate hikes.
This week, Philadelphia Federal Reserve President Patrick Harker’s dour comments have bolstered Fed pause prospects.

“It’s time to at least hit the stop button for one meeting and see how it goes,” Harker said.

AMP’s Oliver said markets are benefiting from the expectation of a June halt. “High payroll numbers will make the market question a pause.”

China shares, which have fallen in recent weeks due to concerns over a slow post-pandemic economic rebound, rose. The Shanghai Composite Index (.SSEC) rose 0.76%, while Hong Kong’s Hang Seng index (.HSI) rose 3.6%, its biggest day in three months.

Australia’s S&P/ASX 200 index (.AXJO) increased 0.42%, while Japan’s Nikkei (.N225) rose 1%, continuing its hot run.

Treasuries yielded less. The two-year U.S. Treasury yield, which follows interest rate forecasts, rose 0.8 bps to 4.349% in Asian hours after falling five bps on Thursday.

The dollar index, which compares the U.S. currency to six major counterparts, was unchanged after falling 0.6% overnight.

The sterling rose 0.02% to $1.2527, while the yen fell 0.11% to 138.93 per dollar.

The Aussie climbed 0.61% to $0.6613, its highest since May 24. Australia’s independent pay-setting body’s July 1 minimum wage increase of 5.75% was the main factor.

U.S. crude rose 0.53% to $70.47 a barrel and Brent 0.53% to $74.67 on optimistic optimism. Markets are also considering weekend OPEC+ output cutbacks.