Asian stocks mostly rose on Monday as investors cheered an agreement in principle between the White House and House Republicans to raise the US debt ceiling that could avert a cataclysmic default.
Japan's Nikkei 225 advanced 1.3% in the morning session. It is on track to hit its highest level since July 1990. The index has rallied more than 20% this year, outpacing global benchmark indexes including the S&P 500 and the Stoxx 600. The yen, meanwhile, strengthened slightly against the US dollar.
US stock futures were also buoyed by the news, with Dow Jones Industrial Average futures rising 0.2%, S&P 500 futures up 0.3% and Nasdaq futures gaining 0.4%.
Elsewhere in the Asia Pacific, Australia's S&P/ASX 200 gained 1.1%. China's Shanghai Composite increased 0.1%. Hong Kong's Hang Seng Index opened higher, but then reversed gains and dropped 0.2%. South Korean markets were closed for a public holiday.
Crude oil prices rose during Asian trading hours. WTI crude, a US benchmark, rose 0.9% to $73.32 a barrel. Brent, a global oil benchmark, gained 0.7%.
On Saturday, President Joe Biden and US House of Representatives Speaker Kevin McCarthy reached an agreement in principle during a phone call, according to a source familiar with their call. The agreement moved the United States one step back from the brink of a historic default.
But the work is far from done.
Now both leaders must sell the deal to their allies in both chambers of Congress, where Republicans control the House and Democrats control the Senate. The deal must be passed before June 5, the crucial date when Treasury Secretary Janet Yellen says the US will no longer be able to pay its bills.
The agreement seems to mark "a significant progress in the US debt ceiling situation," said Jun Rong Yeap, an analyst at IG. Monday's trading in Asia is a positive "first-hand reaction" to abating debt risks, he said. Global investors are also watching China's PMI indexes scheduled to be released later this week, he added.
A US debt default would likely batter the US Treasury market and cause severe damage to its economy, and then reverberate around the world.
China and Japan are the largest foreign holders of American debt, owning a combined $2 trillion in US Treasuries. A potential US debt default would be devastating to their economies as well.
