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Asia stock markets see modest gains after US House passes debt limit deal; STI up 0.2%

TOKYO - Small gains for shares in Asia signaled a muted optimism on Thursday as investors looked beyond the US debt ceiling to instead consider the prospect of a Federal Reserve pause in June.

A deal to suspend the US$31.4 trillion (S$42.4 trillion) debt ceiling was passed by the United States House of Representatives as Asian markets opened, lining the bill up for passage by the Senate before a June 5 deadline to avert a default.

“This has gone through with a very big majority, so there’s enough bipartisan support that it’s very hard to believe this isn’t going to be even more of a formality in the Senate,” said Ray Attrill, head of foreign-exchange strategy at National Australia Bank.

“”What this does is it turns the attention to the incoming data and the Fed meeting this month,” Mr Attrill added.

The US dollar sagged to a one-week low versus the yen and hung close to Wednesday’s more-than-two-month trough to the euro after Federal Reserve officials including Governor and vice chair nominee Philip Jefferson pointed to a rate hike “skip” at the June 13-14 policy meeting.

MSCI’s broadest index of Asia-Pacific shares gained 0.45 per cent, rebounding after touching the lowest level since March 22 in the previous session.

Japan’s Nikkei added 0.29 per cent, while Hong Kong’s Hang Seng gained 1.08 per cent and mainland Chinese blue chips advanced 0.52 per cent. However, South Korea’s Kospi index was down 0.28 per cent.

Singapore’s Straits Times Index was up 0.2 per cent at 11.22am local time.

Money markets currently lay about 38 per cent odds for a hike on June 14, swinging back from about 70 per cent earlier in the day, after some unexpectedly hot jobs numbers.

However, shortly after, the Fed’s Jefferson said skipping a rate hike in two weeks would provide policymakers time to see more data before making a decision. Philadelphia Fed President Patrick Harker also said on Wednesday that for now he is inclined to support a “skip” in rate hikes.

The dollar was little changed at 139.435 yen after slipping to the lowest since May 25 at 138.96 earlier in the session.

The euro was flat at US$1.06905. It sank as low as US$1.0635 on Wednesday for the first time since March 20.

Crude oil prices edged off four-week lows following a surprise swing back to growth in a private survey of Chinese factory activity, with an Opec+ meeting looming on the weekend.

Brent crude futures for August delivery rose 46 US cents, or 0.63 per cent to US$73.06 a barrel, while US West Texas Intermediate crude (WTI) added 40 US cents, or 0.59 per cent, to US$68.49 a barrel. REUTERS, BLOOMBERG