TOKYO -- Asian shares were mostly higher Friday as hopes grow that the U.S. Congress will reach a deal to avoid defaulting on the nation's debt.
Japan's benchmark Nikkei 225 rose 0.8% to finish at 30,808.35. Australia's S&P/ASX 200 gained 0.6% to 7,279.50. South Korea's Kospi added 0.9% to 2,537.79.
Chinese shares fell on renewed worries set off by signs an extended lockdown over the coronavirus pandemic was hurting sales. Also weighing on Chinese shares were inflationary pressures and geopolitical risks, analysts said.
Hong Kong's Hang Seng slipped 1.3% to 19,475.08, while the Shanghai Composite lost 0.4% to 3,283.60.
“While the broader risk environment has been singlehandedly uplifted by progress around the U.S. debt ceiling negotiations, Chinese equities continue to struggle for gains,” said Yeap Jun Rong, market analyst at IG.
President Joe Biden, now in Hiroshima for the Group of Seven summit of major industrialized nations, has said he’s confident about reaching a deal with Republicans to allow the U.S. government to increase its credit limit and borrow more.
The U.S. government is scheduled to run out of cash to pay its bills as soon as June 1 unless a deal is made, and economists say a U.S. federal default could have catastrophic consequences across financial markets and the economy.
Wall Street shares rose after more companies reported better profits than expected, while yields climbed after a Federal Reserve official cautioned the end to its interest-rate hikes may not arrive as soon as Wall Street hoped.
The S&P 500 gained 0.9%, adding to its rally from the day before as hopes rise that the U.S. government can avoid a default on its debt. The Dow Jones Industrial Average added 115 points, or 0.3%, while the Nasdaq composite climbed 1.5%.
The S&P 500 gained 39.28 points to 4,198.05. The Dow rose 115.14 to 33,535.91, and the Nasdaq climbed 188.27 to 12,688.84.
Video game maker Take-Two Interactive had the biggest gain in the S&P 500 after it forecast a huge jump in revenue for the fiscal year following this one. That stoked speculation that Grand Theft Auto VI is on the way, and its stock jumped 11.7%.
Bath & Body Works was close behind with a gain of 10.7%. It reported stronger revenue and earnings for the latest quarter than analysts expected.
Also helping to support Wall Street was another retailer, Walmart, which rose 1.3% after reporting stronger results than expected for the latest quarter. It raised its financial forecast for the full year, though it said it’s seeing shoppers remain cautious about spending.
Much scrutiny has been on the retail industry because strong spending by U.S. households has been one of the main pillars keeping the slowing economy out of a recession.
Stocks have remained remarkably resilient since early April despite a long list of worries. A major reason for that is hope the Fed would take it easier on its hikes to rates, which have slowed inflation at the expense of risking a recession and knocking down prices across financial markets.
The widespread bet was that the Fed would take a pause at its next meeting in June. But Dallas Fed President Lorie Logan cooled some of those hopes in a prepared speech for the Texas Bankers Association.
“The data in coming weeks could yet show that it is appropriate to skip a meeting,” Logan said. “As of today, though, we aren’t there yet.”
Treasury yields climbed as traders increased bets that the Fed would raise rates again at its June meeting, though the majority are still forecasting a pause.
The yield on the 10-year Treasury rose to 3.64% from 3.57% late Wednesday. The two-year yield, which moves more on expectations for the Fed, rose to 4.25% from 4.16%.
In energy trading, benchmark U.S. crude rose 65 cents to $72.51 a barrel. Brent crude, the international standard, edged up 73 cents to $76.59 a barrel.
In currency trading, the U.S. dollar declined to 138.14 Japanese yen from 138.66 yen. The euro cost $1.0786, up from $1.0777.
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AP Business Writer Stan Choe contributed.
Yuri Kageyama is on Twitter https://twitter.com/yurikageyama
