Asia shares rise amid Fed pause talk, debt bill passage

TOKYO, June 1 (Reuters) – Most Asia-Pacific stock markets rose on Thursday amid waning bets for a U.S. interest rate hike this month and relief over passage by the U.S. House of Representatives of a bill to suspend the federal debt ceiling.

A surprise swing to growth for Chinese factory activity also buoyed sentiment, in a rare positive sign of the country̵[ads1]7;s post-pandemic recovery. Crude oil prices retreated from four-week lows.

The dollar fell to a one-week low against the yen and hung near Wednesday’s more than two-month low against the euro after Federal Reserve officials including Governor and Vice Chairman nominee Philip Jefferson pointed to a rate hike at the June 13-14 policy meeting. Treasury yields rose from near two-week nadirs.

MSCI’s broadest index of Asia-Pacific shares ( .MIAP00000PUS ) rose 0.82%, recovering from hitting its lowest level since March 22 in the previous session.

Japan’s Nikkei (.N225) rose 0.77%, while Hong Kong’s Hang Seng (.HSI) gained 1.07% and mainland Chinese blue chips (.CSI300) gained 0.71%.

US S&P 500 e-Mini futures were 0.12% higher.

A divided House passed a bill to suspend the $31.4 trillion debt ceiling – and avert a catastrophic default – with majority support from both Democrats and Republicans, raising optimism that it could pass the Senate before the weekend.

“This has passed with a very large majority, so there is enough bipartisan support that it is very difficult to believe that this is not going to be even more of a formality in the Senate,” said Ray Attrill, head of currency strategy at National Australia Bank.

“What this does is it turns attention to the incoming data and the Fed meeting this month,” Attrill added.

Money markets currently have about 38% odds of a June 14 Fed hike, bouncing back from about 70% earlier in the day, following some unexpectedly hot jobs numbers.

Shortly after, however, the Fed’s Jefferson said that skipping a rate hike by two weeks would give policymakers time to see more data before making a decision. Philadelphia Fed President Patrick Harker also said Wednesday that he is currently inclined to support a “jump” in rate hikes.

More closely watched employment data is due this week, with the ADP survey out later in the data, followed by the monthly non-farm payrolls report on Friday.

“There’s been a pretty sharp pullback in terms of market expectations for the June meeting, and that’s been at odds with the data,” said Tony Sycamore, market analyst at IG Markets.

“I suspect they will put it on hold, but I’m not convinced,” he said. “I think the odds are closer to 50/50.”

The dollar fell to its lowest since May 25 at 138.96 yen early in the Asian session, but rebounded to 0.24% stronger at 139.655 heading into the European morning.

The euro fell 0.08% to $1.06785, moving back towards Wednesday’s low of $1.0635, a level last seen on March 20.

The benchmark 10-year US Treasury yield rose to 3.6733% in Tokyo, after falling to 3.6140% overnight for the first time since May 18.

Brent crude futures for August delivery rose 35 cents, or 0.48%, to $72.95 a barrel, while US West Texas Intermediate crude (WTI) rose 27 cents, or 0.4%, to $68.36 a barrel barrel.

Reporting by Kevin Buckland; Editing by Simon Cameron-Moore and Lincoln Feast.

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