End to US shutdown lifts Asian shares

Tokyo — Asian stocks advanced on Monday as Wall Street rallied after a deal was announced to reopen the US government following a prolonged shutdown that had taken a toll on investor sentiment.

MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.4%.

The Shanghai Composite Index rose 0.7% and Hong Kong’s Hang Seng was up 0.5%.

South Korea’s Kopsi edged up 0.1%, while Japan’s Nikkei bucked the trend and eased 0.3%. Australian financial markets were shut for their Australia Day holiday.

Facing mounting pressure, US President Donald Trump agreed on Friday to temporarily end a 35-day-old partial US government shutdown without getting the $5.7bn he had demanded from Congress for a border wall.

In response Wall Street rallied broadly on Friday as investors were relieved to see an end to one of the longest US government shutdown in history.

The shutdown had left the markets anxious as it came at a time of heightened worries over slowing global growth, signs of stress in corporate earnings and a still unresolved China-US trade war.

“The rise in the broader stock markets looks to keep going. The US government reopening is definitely a plus for market sentiment,” said Soichiro Monji, senior economist at Daiwa SB Investments.

“There are still potential risk factors, such as the US-China trade row and Brexit,” he said.

Chinese Vice-Premier Liu He will visit the US on January 30-31 for the next round of trade negotiations with Washington.

Besides the underlying anxiety on trade, the temporary nature of the US government’s reopening — Trump has threatened to resume the shutdown on February 15 if his demands are not met — remained a source of concern.

“As things stand this morning, we have only 18 days left before we get another government shutdown, or a wall. That should keep things interesting for markets,” wrote strategists at Rabobank.

In the currency market, the pound hovered near a three-month high of $1.3218 set on Friday on the back of optimism that Britain can avoid a no-deal Brexit.

Britain is set to leave the EU on March 29, but the country’s MPs remain far from agreeing a divorce deal and longer-term prospects for sterling remained far from clear.

The immediate focus was on Tuesday, when the British parliament will debate and vote on Prime Minister Theresa May’s Brexit “plan B”.

The euro was also on the front foot against the sagging dollar, which was on the defensive ahead of the Federal Reserve’s January 29-30 policy meeting where it is expected to leave interest rates unchanged after raising them four times in 2018.

The attention will be on the policy outlook as the Fed has signalled a slower pace of rate increases this year with markets speculating it might pause its tightening cycle soon.

The single currency was 0.05% higher at $1.1411 after gaining 0.9% on Friday, paring the losses from earlier last week on dovish-sounding comments by European Central Bank (ECB) president Mario Draghi.

The dollar was slipped 0.2% to ¥109.35 following mild losses at the end of last week.

The benchmark 10-year treasury yield was little changed at 2.747% after popping up four basis points on Friday in the wake of surging US shares.

US crude oil futures were down 0.4% at $53.48 a barrel, with a rise in US rig count stopping a two-day winning run.

Oil prices rose towards the end of last week as political turmoil in Venezuela threatened to tighten crude supply, with the United States signalling it may impose sanctions on exports from the South American nation.

Reuters