Asian Stocks Rise Amid Hopes for a Deal to End the U.S. Government Shutdown

SadaNews - Asian stocks rose while bonds and the yen fell, as risk appetite improved amid hopes for an agreement to end the longest government shutdown in U.S. history, following a volatile week in which investors faced fears about high valuations of artificial intelligence companies.

Futures for the S&P 500 index rose 0.6% in Asian trading, while Nasdaq 100 futures advanced 1.1%, after Senate Republican leader John Thune said that "an agreement is starting to take shape," indicating plans for a test vote on a limited spending package to end the government shutdown that has lasted for 40 days. It seems that a group of moderate Democratic senators is inclined to vote to move forward with the package, provided that the final details are settled.

Asian stocks rose, led by South Korea, while bonds fell across the curve, with the yield on 10-year U.S. Treasury bonds rising by more than two basis points to 4.12%. The yen, a traditional safe-haven currency, fell by 0.2% against the dollar.

Improved Sentiment as Government Shutdown Nears Ending

Ending the government shutdown will give investors clearer insights into key economic data such as employment and inflation, helping to clear ambiguity surrounding the Federal Reserve's path regarding interest rates.

Although hopes for an agreement have brought some relief, markets remain tense after sharp sell-offs in technology stocks last week reignited concerns over inflated valuations.

Charu Chanana, senior strategist at Saxo Markets in Singapore, said: "Hopes for an agreement boost confidence and encourage investors to return to stocks and riskier assets, reducing demand for bonds as a safe haven." She added: "However, volatility may remain high until the agreement is formally approved."

In other markets, the dollar index rose by 0.1% in Monday morning trading, while gold edged slightly higher as markets assessed the U.S. economic slowdown against progress in ending the government shutdown. Oil prices steadied as traders evaluated concerns about supply glut and the implications of U.S. sanctions on Russia.

Government Shutdown Approaches Its End

The historic government shutdown in the United States is nearing its end after a number of moderate Democratic senators agreed to support a deal to reopen the government and fund some departments and agencies for the next year, according to sources familiar with the talks.

The Senate is set to hold a test procedural vote on Sunday. If the vote is successful, the chamber will need approval from all members to quickly end the shutdown. Any member can force a delay of the vote for several days. After that, the House of Representatives must pass the bill to reopen the government, and House Speaker Mike Johnson stated he would give members a two-day notice to return.

Once the government reopens, investors will be able to access crucial economic data reflecting the state of the U.S. economy, helping them to assess the likelihood of interest rate cuts by the Federal Reserve.

Last week, investors faced mixed signals, as private sector data showed a reduction in jobs, while remarks from Federal officials about inflation raised doubts as to whether a rate cut could really occur in December.

Nick Twidale, chief analyst at AT Global Markets in Sydney, said: "The lack of data has increased uncertainty, especially regarding further interest rate cuts," adding that "the resumption of data releases will pave the way for greater clarity regarding potential cuts."

Growing Interest in Japanese Stocks Amid Economic Shift

At the same time, U.S. investors are increasingly interested in buying Japanese stocks linked to technology and artificial intelligence, driven by higher returns compared to their U.S. counterparts, according to Goldman Sachs Group.

The new Japanese Prime Minister expressed last week her determination to enhance the use of fiscal policy to stimulate economic growth by abandoning the annual budget target that favors financial discipline.