Asian Stocks Set to Rise as Traders Shrug Off Rating Downgrade
Shares in Asia are set to follow Wall Street higher as investors look past a U.S. credit downgrade by Moody’s Ratings.
Equity index futures rose in Tokyo, Hong Kong and Sydney, supported by a recovery in the S&P 500 on Monday after an early decline. The U.S. benchmark rose for a sixth straight day to close on the brink of a bull market. Treasuries also rallied, following a rout that briefly pushed the 30-year yield above 5%. The dollar and gold were steady in early trading Tuesday.
European and U.S. stocks shrugged off the downgrade after Treasury Secretary Scott Bessent downplayed concerns, saying the government is determined to reduce spending and boost the economy. Investors in Asia also remained focused on the outcome of U.S. trade talks with India and Japan after talks with China on tariff reductions raised optimism.
“The search for a new market catalyst begins,” said Chris Larkin at E*Trade of Morgan Stanley. “The S&P 500 ended last week up for the year, and just over 3% below its all-time high. Whether it closes that gap anytime soon is one thing, sustaining the rally afterward is another.”
China accused the Trump administration of undermining recent trade talks in Geneva by warning that using Huawei Technologies Co.’s artificial intelligence chips “anywhere in the world” would violate U.S. export controls. The Asian nation’s commerce ministry demanded in a statement that the U.S. “correct its mistake.” India is negotiating a three-phase U.S. trade deal and hopes to reach an interim agreement before July, when President Donald Trump’s tit-for-tat tariffs are set to take effect, according to officials in New Delhi familiar with the matter.
Economists and money markets expect the RBA to announce a quarter-percentage-point cut to bring its cash rate to a two-year low of 3.85%. However, they expect Governor Michele Bullock may be reluctant to suggest further easing is coming when she appears before reporters later Tuesday. Elsewhere in Asia, there were signs that China’s prolonged property crisis, deflationary pressures and jobless concerns were weighing on household confidence.
While data on Monday showed industrial output rose faster than expected in April, consumption disappointed. The government, which has set an ambitious economic growth target of around 5% for 2025, has made boosting domestic consumption a priority this year.
“The encouraging industrial output numbers only reflect one part of the economy,” said Raymond Yeung, chief economist for Greater Australia & New Zealand Banking Group Ltd. “But April’s retail sales numbers show that people are not spending. To get to 5% growth, we still need consumption.” S&P 500 futures were little changed at 8:15 a.m. Tokyo time
Hang Seng futures rose 0.5%
S&P/ASX 200 futures rose 0.9%
Bloomberg Dollar Spot Index little changed
Euro little changed at $1.1233
Japanese yen little changed at 144.95 per dollar
Offshore yuan little changed at 7.2151 per dollar
Australian dollar little changed at $0.6455
West Texas Intermediate crude little changed
Spot gold fell 0.3% to $3,221.26 an ounce
Source: Bloomberg
