Asian stocks climb on US deal

Stocks climbed with US futures, bonds retreated and the yen weakened as a tentative deal by the US Congress to avert a government shutdown overshadowed weaker economic data from China and the US.

The MSCI Asia Pacific Index rose, after capping a fourth straight month of gains on Friday. Japanese shares advanced to the highest level since March after their best week of the year. The yen weakened for the fifth day out of six, while Treasuries retreated with gold. Oil held at its lowest level in a month. US House and Senate negotiators reached a tentative bipartisan agreement Sunday night on a $1.1 trillion bill to keep the government open through the end of September, according to Republican and Democratic aides.

The news triggered a swing in markets in Asia after equities and currencies’ traders had been loath to take additional risk ahead of a busy week for macro-economic events and data. “It’s a good thing a tentative deal was reached without too much trouble,” says Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co. in Tokyo. “It seems that we’re able to put behind some of the things that the market’s recently been worried about. But US economic data on jobs and the GDP is reason for caution.”

Trading volumes are lower than average due to the Labor Day or May Day holiday in many countries, including China, India, Russia, UK, Hong Kong, Germany, Singapore and Mexico. Later on this week Japan will be closed for a three-day holiday. China data from the weekend showed a decline in manufacturing and services sectors. That followed weaker-than-expected U.S. growth in the first quarter, casting doubts on the strength of the global expansion after optimism on the economy and earnings pushed stocks to records last month.

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Investors will be watching comments from a policy meeting of the Federal Open Market Committee this week and the monthly US employment report on Friday, as well as corporate earnings from global heavyweights. The second round of the French presidential election takes place May 7; candidate Marine Le Pen said Monday she would begin negotiations on a euro exit immediately if elected. Traders are also weighing the possibility of escalating tension between the US and North Korea.

Bloomberg