Australia

Australian shares are leaning higher this morning following a mixed day on Wall Street. High-stakes US debt ceiling negotiations and comments from Federal Reserve officials contributed to a tense market tone.

ASX futures had ticked up by 6 points, or 0.1%, as of 6:00am on Tuesday, suggesting a higher open.

US stocks traded mixed in a tight range and bond yields rose Monday. Traders awaited news from the debt ceiling negotiations and chewed over the latest remarks from Federal Reserve officials, including from one who said he favored additional interest rate increases.

The tech-heavy Nasdaq Composite rose 0.5% to a new 2023 high, while the S&P 500 was little changed. The indices are now up 22% and 9.2% on the year, respectively. The Dow Jones Industrial Average shed 0.4%, or about 140 points, to leave it up just 0.4% this year.

President Biden and House Speaker Kevin McCarthy were due to meet Monday evening in pursuit of a deal to raise the government's debt ceiling by June 1, when Treasury Secretary Janet Yellen has said the US could run out of money to pay all its bills.

Trading that has pushed stocks to their highest level in months since last summer suggests investors are beginning to look past a potential default and toward future interest rate decisions and the likelihood of a recession.

In commodity markets, Brent crude oil gained 0.5% to US$75.95 a barrel while gold dipped 0.3% to US$1,972.90.

Australian government bonds were slightly lower, with the 2 Year yield declining to 3.47% and the 10 Year yield unchanged at 3.59%. Overseas, US Treasury notes moved higher, with the 2 Year yield increasing to 4.31% and the 10 Year yield rising to 3.72%.

The Australian dollar moved up to 66.52 US cents from its previous close of 66.47. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, inched higher to 97.13.

Asia

Chinese shares closed higher thanks to a stronger yuan versus the US dollar and a less aggressive stance by the US and its allies against Beijing at the G-7 meeting. Consumption stocks and automakers led the gains. Proya Cosmetics rose 5.4% and BYD Co. increased 2.3%. Losers included software makers and the media sector. Beijing Kingsoft Office Software dropped 4.1% and Wanda Film Holding declined 0.8%. The Shanghai Composite Index closed 0.4% higher at 3296.47. The Shenzhen Composite Index also ended 0.4% in the green while the ChiNext Price Index rose by 0.1%.

Hong Kong shares ended higher as the yuan rallied against the US dollar, reclaiming part of the currency's losses last week. A softer-than-expected stance by the US and its allies against Beijing at the G-7 meeting also boosted the mood. The Hang Seng Index rose 1.2% to 19678.17. Tech shares advanced, with the Hang Seng Tech Index adding 2.1%. Baidu rose 3.3% and Meituan climbed 3.1%. Automakers also gained, with BYD up 3.4%. Some developers declined. China Overseas Land & Investment dropped 0.3% and Seazen Group lost 1.4%.

The Nikkei Stock Average of Japan rose 0.9% to 31086.82, its highest closing level since July 1990, reversing its losses earlier in the session. Asian investors appeared to be optimistic about the US debt-ceiling negotiations and China's economic recovery, Priyanka Sachdeva, market analyst at Phillip Nova, explained in an email. Gains on the Japanese index were broad based, with Tokio Marine Holdings climbing 5.7%, Otsuka Holdings rising 3.4% and Mitsubishi Heavy Industries up 3.2%.

Indian shares ended higher, driven by gains in Adani Group stocks after a preliminary report found no evidence of share-price manipulation. A committee appointed by the Supreme Court said in a preliminary report released Friday that it did not find evidence of regulatory failure by the Securities and Exchange Board of India, nor did it find evidence that Adani companies have been manipulated abroad. However, the report noted that the SEB suspects wrongdoing. The benchmark Sensex index rose 0.4% to settle at 61963.68. Adani Wilmar rose 10.0% and Adani Ports & Special Economic Zone climbed 6.0%. Among losers were Axis Bank, which dropped 0.8%, and Tata Motor, which declined 0.5%.

Europe

European markets were mixed Monday, though Asian markets traded broadly higher. The pan-European Stoxx Europe 600 traded flat, the French CAC 40 lost 0.2% and the German DAX shed 0.3%.

"While last week ended with concerns that US debt-ceiling negotiations had broken down, today has seen hopes of further progress," IG analysts wrote. "US president Biden and Republican leader [Kevin] McCarthy will meet today, with less than two weeks before the default date."

Meanwhile, in London, the FTSE 100 rose 0.2% as China-exposed stocks rose after US President Joe Biden said relations with China should improve very soon. "Despite broker downgrades to the likes of Kingfisher and Sainsbury providing a small drag, firms with Chinese exposure such as Standard Chartered and Burberry found some support," Interactive Investor analyst Richard Hunter wrote. A "pleasing update" on the airline sector from budget airline Ryanair also gave a boost to British Airways owner IAG and aerospace and defence company Rolls-Royce Holdings, he explained. Ryanair said on Monday it swung to an annual profit following a rebound in travel demand and higher air fares.

North America

US stocks traded mixed in a tight range and bond yields rose Monday. Traders awaited news from the debt ceiling negotiations and chewed over the latest remarks from Federal Reserve officials, including from one who said he favored additional interest rate increases.

The tech-heavy Nasdaq Composite rose 0.5% to a new 2023 high, while the S&P 500 was little changed. The indices are now up 22% and 9.2% on the year, respectively. The Dow Jones Industrial Average shed 0.4%, or about 140 points, to leave it up just 0.4% this year.

President Biden and House Speaker Kevin McCarthy were due to meet Monday evening in pursuit of a deal to raise the government's debt ceiling by June 1, when Treasury Secretary Janet Yellen has said the US could run out of money to pay all its bills.

Trading that has pushed stocks to their highest level in months since last summer suggests investors are beginning to look past a potential default and toward future interest rate decisions and the likelihood of a recession.

Regional banks continued to rebound after PacWest said it sold a bundle of real estate loans for $2.6 billion. Shares of the Los Angeles bank jumped 20%. Several lenders gained at least 3%, including KeyCorp, Regions and Comerica. Zions Bancorp's hard-hit stock gained 4.9%.

Shares of Facebook owner Meta Platforms continued to bounce back from last year's swoon, rising 1.1% after being fined $1.3 billion by European Union regulators for sending user information to the US. The stock has more than doubled so far in 2023.

Chevron said it would acquire smaller energy producer PDC Energy in an all-stock deal worth $6.3 billion, boosting the oil major's position in Colorado's Denver-Julesburg Basin and the Permian Basin in West Texas. Investors have expected consolidation in the oil patch given the mountain of money oil producers' piled up due to last year's high energy prices. The deal was met with a ho-hum reaction from traders. Chevron's shares fell 1.8%.

Micron Technology declined 2.8% after China said it is banning major firms from buying products from the semiconductor maker.

Fed officials made public remarks Monday that added to the mixed messages from policy makers during the rate-hike cycle that began last March.

St. Louis Fed President James Bullard said at an American Gas Association gathering in Florida that he favors two more 0.25% rate increases. "I think we're going to have to grind higher with the policy rate in order to put downward pressure on inflation," he said.

His counterpart at the San Francisco Fed, Mary Daly, told an economic conference that the central bank's policy should be "about extreme data dependence and policy optionality."

"I really think at this point in our tightening cycle, it is prudent to resist the temptation to say what we're going to do for the rest of the year," she said.