Yen down, stocks and US futures up on Congress deal to avoid shutdown

TOKYO • The yen weakened with bonds, while stocks and United States futures climbed, as a tentative deal by the US Congress to avert a government shutdown offset weaker economic data from China and America.

The Japanese currency slipped for the fifth day in six, while Treasuries retreated with gold. Japan's Topix rose to the highest level since March after its best week of the year. Trading volumes were lower than average due to holidays in most of Europe, China, India and Mexico, and a forthcoming three-day break in Japan.

US House and Senate negotiators reached a tentative bipartisan agreement on Sunday night on a US$1.1 trillion (S$1.5 trillion) bill to keep the government open to the end of September, according to Republican and Democratic aides. The news triggered a swing in markets in Asia after equities and currencies' traders had been loath to take additional risk ahead of a busy week for macroeconomic events and data.

"It's a good thing a tentative deal was reached without too much trouble," said Mr Naoki Fujiwara, chief fund manager at Shinkin Asset Management in Tokyo. "It seems that we're able to put behind some of the things that the market's recently been worried about. But US economic data on jobs and the GDP (gross domestic product) is reason for caution."

China data from the weekend showed a decline in manufacturing and services gauges. That followed weaker-than-expected US growth in the first quarter, casting doubts on the strength of the global expansion after optimism on the economy and earnings pushed stocks to records last month.

Investors will be watching comments from a policy meeting of the Federal Open Market Committee this week and the monthly US employment report on Friday, as well as corporate earnings from global heavyweights.

It's a good thing a tentative deal was reached without too much trouble. It seems that we're able to put behind some of the things that the market's recently been worried about.''

CHIEF FUND MANAGER NAOKI FUJIWARA, at Shinkin Asset Management in Tokyo, about the tentative US$1.1 trillion (S$1.5 trillion) deal by the US Congress to avert a government shutdown.

The second round of the French presidential election takes place on Sunday; candidate Marine Le Pen said yesterday she would begin euro-exit negotiations immediately if elected. Traders are also weighing the possibility of escalating tension between the US and North Korea.

Gold dropped 0.4 per cent to US$1,262.88 an ounce. The metal declined 1.3 per cent last week, paring a yearly advance to 10 per cent.

West Texas Intermediate crude fell 0.3 per cent to US$49.17 a barrel. Oil lost 2.5 per cent in April, and is down almost 9 per cent this year.

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A version of this article appeared in the print edition of The Straits Times on May 02, 2017, with the headline 'Yen down, stocks and US futures up on Congress deal to avoid shutdown'. Print Edition | Subscribe