Asia Markets Cautiously Higher Amid US Debt Jitters And Tax Bill Progress

BusinessToday

23-05-2025

Asian shares made modest gains on May 23 as investors weighed signs of US fiscal strain against optimism surrounding the passage of US President Donald Trump's controversial tax bill through the House of Representatives.
Despite concerns over ballooning US debt, Asia-Pacific equities stabilised, buoyed by bargain-hunting in beaten-down US Treasuries and hopes of eventual policy clarity.
The MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.1%, remaining down 0.4% for the week, ending a five-week winning streak.
Japan's Nikkei led regional gains, climbing 1% after data showed core inflation rose at its fastest annual pace in over two years, raising hopes that domestic demand could finally be firming. Meanwhile, Chinese blue chips and the Hang Seng in Hong Kong were little changed, reflecting investor caution amid broader global volatility.
The tentative optimism in Asia followed a muted Wall Street session. While initial enthusiasm was sparked by strong US Purchasing Managers Index (PMI) data for May, which suggested accelerating business activity, equities lost steam by the close. Nasdaq and S&P 500 futures remained flat in early Asian trading, underscoring uncertainty over the longer-term impact of the US tax overhaul.
Meanwhile, the yield on 30-year US Treasuries fell another basis point to 5.037% on May 23, retreating from a 19-month peak of 5.161%.
In Japan, yields on 30-year government bonds hovered near record highs at 3.175%, surging 23 basis points this week. The spike is now under close scrutiny from the Bank of Japan, raising speculation of possible intervention.
On the other hand, currency markets reflected the global unease. The US dollar remained under pressure, down 1.2% for the week against a basket of major peers. The euro gained 0.2% to US$1.1302, poised for its first weekly advance in over a month.
Digital assets continued their bullish streak, with Bitcoin gaining 7% this week to trade at US$111,524, just shy of May 22's all-time high of US$111,965.
Federal Reserve Governor Christopher Waller added to market uncertainty by signalling a potential rate cut later this year, but emphasised that the trajectory depends on how the administration's trade and fiscal policies evolve.
Oil prices extended losses for a fourth straight session, weighed down by prospects of increased output from OPEC+ nations. US crude fell 0.7% to US$60.76 a barrel, down 2.7% for the week. Brent slipped 0.6% to US$64.03.
Gold prices held steady at US$3,292 per oz but were on track for a weekly gain of 2.8%, reflecting continued demand for safe-haven assets amid macroeconomic uncertainty.
Moving forward, with US fiscal policy now in sharper focus and bond markets flashing warning signals, investors in Asia are proceeding with caution. Related