Asian markets mixed after US reaches debt ceiling deal; Japan stocks hit highest since July 1990

Deutsche Bank is “optimistic” about China in the medium and long term despite the uneven economic recovery, said Stefanie Holtze-Jen, its chief investment officer for the Asia Pacific region.

“Overall, it’s been an uneven recovery. I think everybody understands that now,” Holtze-Jen said on CNBC’s “Squawk Box Asia” on Monday. China’s industrial firms saw profits fall at the slowest pace in April, while retail sales rose 18.4% year-on-year.

“But those are parts of the economy, especially on the consumer side, that will be very supportive. And we’ve got a lot of rhetoric from the government about that,” Holtze-Zen said.

In April, the Communist Party said it would maintain support for the economy, focusing on boosting domestic demand.

“We found the data around the May Day holiday in China very interesting,” he added. Over the May Day holiday, China’s tourism industry returned to pre-Covid-19 levels, with domestic trips up by more than two-thirds from a year ago.

“The rest of Asia is benefiting greatly from China’s reopening story and it will be with us for a long time,” Holtze-Jen said, noting that Thailand “is attracting more optimistic tourists from China.”

“We are still optimistic about the Asia campus, especially compared to the US and Europe,” said Holtze-Zen.

– Sheila Chiang

The dollar index could strengthen to 105 in the short term with the US jobs report due later this week and a vote on the debt ceiling deal, SMBC said in a note on Monday.

“Asian currencies are expected to weaken, but as more market participants look for opportunities for Asian currencies, risk-on sentiment after the Fed’s pause in rate hikes is expected to prepare,” wrote Ryota Abe, Asia Pacific economist at Sumitomo Mitsui Banking Corporation (SMBC).

The dollar index fell slightly to 104.164 in the Asian morning session. The Japanese yen strengthened slightly to 140.52 against the US dollar, while the offshore Chinese yuan weakened to 7.0791 against the greenback.

“U.S. economic data released last week supports bearish stance on rate hikes,” Abe wrote in the note. “Combined with the CPI released earlier this month, the data shows stronger-than-expected inflationary pressures, rekindling inflation concerns in the US,” he wrote.

– Jihye Lee

Wharton School professor Jeremy Siegel expressed concern that tighter lending standards could be combined with “a lot more tightening” by the US Federal Reserve to affect small and medium-sized firms later this year.

“I think the smart money is actually going to have a (debt ceiling) deal, so that removes a little bit of uncertainty, but there’s a lot of concern about the tremendous amount of tightening that the Federal Reserve has done,” Siegel said. CNBC Monday.

“Banking problems that do not lead to a crisis of bank deposits will tighten credit standards, especially for small and medium enterprises,” he added. “I worry about the second half of the year, maybe what we’ll see now is a focus on those issues.”

— Clement Dan

Shares of Japanese trading companies, supply services and technology stocks led the biggest gains on Japan’s Nikkei 225 index on Monday, with the index up 2% at the open and 1.32% higher in late trade.

Optical and imaging company Nikon advanced 4.51% to top the index, while semiconductor equipment maker Advantest was the second-biggest gainer, up 4.18%.

Other names on the list of top gainers include trading conglomerates Sumitomo Corporation and Mitsubishi Corporation and SoftBank Group.

China’s recent slump in industrial profits gives its central bank an argument to cut interest rates, Deloitte China told CNBC.

“There is no inflation in China, so you need a loose monetary policy,” Chitao Xu, chief economist for Deloitte China, told CNBC’s “Squawk Box Asia” on Monday.

He pointed out that the People’s Bank of China’s daily USD/CNY reference rate, or midpoint fix, is acting like a rate cut.

“If you look at the recent change in the exchange rate, it’s the same impact as lowering interest rates,” he told CNBC.

The PBOC on Monday set its yuan peg at 7.0575 against the US dollar, compared with the previous session’s 7.0760.

– Jihye Lee

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– Weissen Don

Singapore state-owned investor Temasek has slashed the compensation of senior management and its investment team responsible for recommending an investment in failed cryptocurrency exchange FTX.

“While there was no fault in reaching the investment committee’s investment recommendation, the investment committee and senior management, ultimately responsible for the investment decisions made, took joint accountability and compensation was reduced.” Chairman Lim Boon Heng said in a statement.

The move by Temasek comes after an internal review was launched to consider its investment in FTX, which resulted in a $275 million write-down.

Lim said FTX was “deliberately hidden from investors, including Temasek”. The report did not specify how many employees were affected or the severity of the pay cuts.

– Lim Hui Jee

Cleveland Federal Reserve President Loretta Mester told CNBC on Friday that she expects more interest rate hikes will be needed as inflation continues to rise.

“When I look at the data and what’s going on with the inflation numbers, I think we need to be a little bit more tight,” Mester said on “Squawk on the Street.” “We’ve made progress. Now it’s this calibration exercise, and that’s the hard part.”

Meister is a non-voting member of the rate-setting Federal Open Market Committee this year.

– Jeff Cox

The core personal consumption expenditure index, the central bank’s preferred measure of inflation, rose 0.4% in April. That’s more than Dow Jones expected and economists. Year-on-year, core PCE rose 4.7%, which was more than expected.

– Fred Imbert

Markets raised their bets on a June rate hike from the Federal Reserve following warmer-than-expected inflation data on Friday morning.

The odds of a quarter-percentage-point increase rose to 56%, according to CME Group data. That followed a report showing that prices of personal consumption expenditures rose 0.4% in April and 4.7% from a year ago.

The odds of an increase were only 17% a week ago. The probability of a hike increases to 75% after July.

– Jeff Cox

The final reading of May consumer sentiment came in slightly above expectations. University of Michigan Consumer Sentiment Index came in at 59.2, while economists polled by Dow Jones had forecast 57.7.

Of course, that level is below April’s 63.5.

“Consumer sentiment fell 7% amid concerns about the economy’s path, wiping out nearly half of the gains made since last June’s record decline. The decline mirrors the 2011 debt ceiling crisis,” consumer director Jon Hsu wrote.

– Fred Imbert