Asian Shares Mostly Lower On China-U.S. Tensions

Asian stocks ended mostly lower on Tuesday as growing China-U.S. tensions and hawkish Fed comments overshadowed optimism related to U.S. debt ceiling talks.

U.S. President Joe Biden and House Speaker Kevin McCarthy said they held productive talks but there was no agreement on how to raise the government’s $31.4 trillion debt ceiling.

Gold prices fell as the dollar index edged up on hawkish comments from Federal Reserve Bank of St. Louis President James Bullard and his Minneapolis colleague Neel Kashkari. Oil prices were little changed after settling higher on Monday.

Chinese markets fell sharply amid fears of a resurgence in China-U.S. trade tensions after China banned U.S. chip maker Micron from selling its products to Chinese companies working on key infrastructure projects.

Growth concerns also weighed after recent economic data suggested that a post-COVID rebound in the country was running out of steam.

China’s Shanghai Composite Index tumbled 1.5 percent to 3,246.34, while Hong Kong’s Hang Seng Index closed 1.3 percent lower at 19,431.25.

Japanese shares dropped from a 33-year high to snap an eight-day winning streak on optimism over the Bank of Japan maintaining its ultra-dovish policy.

The Nikkei 225 Index slipped 0.4 percent to 30,957.77, while the broader Topix ended 0.7 percent lower at 2,161.49. Tech stocks led losses, with Advantest, Tokyo Electron and Screen Holdings falling 2-3 percent. Nippon Paper Industries soared 15 percent after Nomura upgraded the stock to “buy.”

Japanese manufacturing activity expanded for the first time in seven months in May, while growth in the services sector hit a record high, a survey showed earlier in the day.

Seoul stocks eked out modest gains after a central bank survey showed consumer sentiment in the country improved in May to the highest level in a year. The Kospi rose 0.4 percent to 2,567.55.

Australian markets finished marginally lower after data showed manufacturing sector in the country saw a second consecutive month of decline in April.

Falling bullion prices pulled down gold miners, with Northern Star Resources and Newcrest Mining sliding 1-2 percent. National carrier Qantas fell 2.2 percent despite forecasting a record annual profit for fiscal 2023.

Across the Tasman, New Zealand’s benchmark S&P/NZX 50 Index finished 0.4 percent lower at 11,944.20.

U.S. stocks closed mixed overnight as investors awaited new updates on debt ceiling negotiations and Treasury Secretary Yellen said that the likelihood of the Treasury paying all U.S. bills by June 15th is quite low.

Hawkish comments from Fed officials also weighed, with Federal Reserve Bank of St. Louis President James Bullard backing two more interest-rate increases in 2023 and his Minneapolis colleague Neel Kashkari cautioning against reading too much into a June pause.

The Dow shed 0.4 percent, while the S&P 500 finished marginally higher and the tech-heavy Nasdaq Composite added half a percent.

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