Asian stocks climb as investors weigh US debt, trade and rate decisions

Malay Mail

20-05-2025

Investors shrug off Moody's US credit downgrade
Dollar drifts as selloff in Treasuries ease
Eyes on RBA policy decision; rate cut expected
SINGAPORE, May 20 — Asian stocks rose today while US Treasury yields steadied allowing a bit of a breathing room for the US dollar as investors took stock of the debt load of the world's biggest economy and awaited trade deals.
Moody's downgrade of its rating for US sovereign credit last week — due to concerns about that nation's growing US$36 trillion (RM154 trillion) debt pile — led to a selloff in Treasuries yesterday but that stabilised by Asian trading hours today.
'The Moody's downgrade was a temporary shock and rather meaningless in the bigger picture,' said Kyle Rodda, senior financial market analyst at Capital.com.
'But then we're not really being fed any kind of fresh new news for investors to buy into... We haven't gotten any new deals coming through.'
With little indication of trade deals on the way, markets are struggling for direction, analysts said.
The 30-year bond yield was 3.5 basis points lower at 4.906 per cent after hitting an 18-month high of 5.037 per cent in the previous trading session. Major US stock indexes recovered from early loss to end mostly flat.
That left the MSCI's broadest index of Asia-Pacific shares outside Japan 0.36 per cent higher, hovering near the seven-month high touched last week. Japan's Nikkei gained 0.65 per cent in early trade.
Chinese stocks were steady at the open after the local central bank cut benchmark lending rates for the first time since October, while five of China's biggest state-owned banks also lowered deposit interest rates.
The blue-chip index was 0.15 per cent higher whereas Hong Kong's Hang Seng Index rose 1 per cent.
US Federal Reserve officials took on cautiously the ramifications of the Moody's downgrade and unsettled market conditions as they continued to navigate an uncertain economic environment in the wake of erratic US trade action.
While not an imminent issue for the Fed, higher borrowing costs tied to a deteriorating US financial position could make credit generally more expensive and create restraint on economic activity.
Traders have priced in two interest rate cuts from the US central bank this year, versus four last month when President Donald Trump's tariff salvos upended markets and led to investors exiting US assets.
'For now, US exceptionalism and corporate resilience are offsetting the risks,' said Charu Chanana, chief investment strategist at Saxo in Singapore.
'But how long before investors start demanding a higher risk premium, especially with the Fed in wait-and-see mode and trade talks seemingly stalling?'
Markets will be monitoring a US congressional debate over a tax bill later in the day at which Trump is widely expected to be present ahead of a vote on the legislation later this week.
The measure would extend Trump's 2017 tax cuts and potentially add US$3 trillion to US$5 trillion to national debt over the next decade.
Investors will also watch out for a policy decision from the Reserve Bank of Australia, with cuts to interest rates widely expected. The Australian dollar was a tad weaker at US$0.64485.
In commodities, oil prices were mixed as investors contended with a potential breakdown in talks between the US and Iran over the latter's nuclear activity and weakened prospects of more Iranian supply entering the market. — Reuters