TOKYO -- Asian shares mostly drifted higher Monday as investors fretted whether the United States government would be able to reach a deal to avoid a federal default.
Japan's benchmark Nikkei 225 was little changed in morning trading, gaining nearly 0.1% to 30,833.94. Australia's S&P/ASX 200 slid 0.3% to 7,261.40. South Korea's Kospi gained 0.9% to 2,560.16. Hong Kong's Hang Seng jumped 1.2% to 19,691.82, while the Shanghai Composite edged up 0.1% to 3,287.30.
Markets are closely watching a pivotal meeting set for later in the day at the White House between President Joe Biden and House Speaker Kevin McCarthy on the debt ceiling. A default on the U.S. debt would almost surely cause a recession in the American economy, which would have damaging effects on global economies.
“It seems pretty likely that a full-fledged 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 U.S. efforts to avoid a potentially disastrous default on its debt.
“While negotiation strategy and political incentives imply a last-minute deal, we will soon find out if it’s baked beans or lobster during the Memorial Day holiday.”
Data for machinery orders in Japan for March, released Monday, highlighted a slowdown in the world's third-largest economy, with the key indicator falling 3.9% for the second-straight month of declines. But analysts think a recovery is coming during this quarter, as domestic manufacturing gradually rebounds from the various negative effects related to the pandemic.
Wall Street closed out last week lower. The S&P 500 slipped 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 composite gave up 30.94, or 0.2%, to 12,657.90.
The White House and House Republicans wrapped up another round of talks over the weekend.
Washington needs to strike a budget compromise along with a deal to raise the nation’s borrowing limit to avoid a federal default. Democrats and Republicans face a June 1 deadline, which is when the U.S. government could run out of cash to pay its bills, unless Congress allows it to borrow more.
On the positive side, U.S. Federal Reserve Chair Jerome Powell made comments Friday to indicate the Fed may leave interest rates alone at its next meeting in June.
After Powell spoke, Treasury yields gave up some of their gains from earlier in the day as traders ratcheted back bets for another Fed rate hike in June.
The yield on the 10-year Treasury rose to 3.69% from 3.65% late Thursday. That yield helps set rates for mortgages and other important loans.
The two-year Treasury yield, which moves more on expectations for Fed action, climbed as high as 4.33% before Powell began speaking. It later fell back to 4.25%, down from 4.26% late Thursday.
The majority of companies in the S&P 500 have been reporting stronger earnings for the start of the year than analysts expected. But they're still on track to report a second consecutive quarter of profit declines from year-ago levels.
In energy trading, benchmark U.S. crude lost 55 cents to $71.00 a barrel. Brent crude, the international standard, fell 58 cents to $75.00 a barrel.
In currency trading, the U.S. dollar slipped to 137.65 Japanese yen from 137.88 yen. The euro cost $1.0823, up from $1.0808.
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AP Business Writer Stan Choe contributed from New York.
Yuri Kageyama is on Twitter: https://twitter.com/yurikageyama
