Asia Stocks Rise, Led by Banks, as U.S. Leaders Strike Debt Deal

Asian stocks rose, snapping three days of declines, after U.S. President Barack Obama said congressional leaders reached an agreement to raise the nation’s debt ceiling and cut the federal deficit, boosting the outlook for banks and exporters.

Toyota Motor Corp. (7203), the world’s largest carmaker that counts North America as its biggest market, increased 0.5 percent in Tokyo. Samsung Electronics Co., the South Korean television maker that reports “America” is its second-biggest market for sales, rose 3.1 percent in Seoul. National Australia Bank Ltd. (NAB), the nation’s No. 3 lender by marker value, gained 2 percent in Sydney. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s largest listed lender by market value, jumped 4.1 percent after reporting first quarter profit tripled.

“Investors who were very concerned about the debt-ceiling negotiations now need to buy back their positions,” said Yoshihiro Okumura, who helps manage the equivalent of $365 million at Chiba-Gin Asset Management Co. in Tokyo. “There had been a lot of risk aversion because a default would have meant that the U.S. government would lose the ability to stimulate the economy with public spending.”

The MSCI Asia Pacific Index gained 1.4 percent to 138.74 as of 7:30 p.m. in Tokyo. About four shares rose for each that declined on the gauge. The measure lost 1.6 percent last week amid concern U.S. lawmakers would be unable to reach an agreement to raise the nation’s debt ceiling before tomorrow’s deadline.

U.S. Futures

Japan’s Nikkei 225 (NKY) Stock Average advanced 1.3 percent. South Korea’s Kospi index rose 1.8 percent. Australia’s S&P/ASX 200 Index increased 1.7 percent. Hong Kong’s Hang Seng Index climbed 1 percent, while China’s Shanghai Composite Index rose 0.1 percent after swinging between gains and losses.

Singapore’s Straits Times Index gained 0.8 percent as the stock market started trading without a lunch break today. India’s Bombay Stock Exchange Sensitive Index climbed 0.6 percent.

Futures on the Standard & Poor’s 500 Index gained 1.3 percent today, snapping a seven-day losing streak. Obama announced that leaders of both parties in the U.S. House and Senate had reached a tentative bipartisan agreement to raise the debt ceiling, preparing to sell the deal to skeptical Republicans and Democrats ahead of possible on Aug. 2.

“The leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default,” Obama said in a speech from Washington.

In New York, the S&P 500 fell 0.7 percent to 1,292.28 on July 29 as economic growth trailed forecasts and investors awaited the outcome of negotiations to avoid a debt default.

Toyota, Honda

Toyota, which receives 28 percent of its revenue from North America, rose 0.5 percent to 3,170 yen in Tokyo. Honda Motor Co., which gets 83 percent of its sales from outside Japan, advanced 1.5 percent to 3,125 yen. Samsung Electronics, which receives 22 percent of its revenue from America, rose 3.1 percent to 870,000 won. Li & Fung Ltd. (494), the largest supplier of toys and clothes to retailers including Target Corp. and Wal- Mart Stores Inc., climbed 2.2 percent to HK$13.24.

Banks posted the biggest increase among the MSCI Asia Pacific Index’s 10 industry groups, providing the greatest support to the index.

Australia & New Zealand Banking Group rose 2.2 percent to A$21.29, while Commonwealth Bank of Australia (CBA), the country’s No. 1 lender, advanced 1.7 percent to A$50.09. Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest bank by market value, rose 2.9 percent to 2,505 yen. National Australia Bank climbed 2 percent to A$24.49.

Government Shutdown Fears

Stocks are gaining because “fears of a partial U.S. government shutdown or default have been the main worry for investors recently,” given the potential impact on Asian exporters, said Sydney-based Shane Oliver, head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “Nervousness is likely to remain high as the deal will still have to pass both houses of Congress.”

A gauge of raw-material and energy producers rose at least 1.2 percent. Copper gained to near a more-than-three-month high on optimism the U.S., the second-largest user of the metal, will avoid a default. Aluminum and zinc also rose.

BHP Billiton Ltd. (BHP), the world’s No. 1 mining company which counts China as its biggest market for sales, advanced 2.1 percent to A$42.30 in Sydney. Smaller Rio Tinto Group, the world’s second-largest mining company by sales, advanced 1.9 percent to A$81.52. PetroChina Co. rose 1.6 percent to HK$11.22.

China PMI

A Chinese manufacturing index was higher than economists estimated in July, signaling the world’s second-biggest economy is withstanding increased interest rates and tightened credit. The Purchasing Managers’ Index was at 50.7 for July compared with 50.9 in June, the China Federation of Logistics and Purchasing said in a statement today. That was more than every forecast in a Bloomberg News survey of 13 economists. The median estimate was for a reading of 50.2.

Mitsubishi UFJ jumped 4.1 percent to 408 yen, the third- biggest support to the MSCI Asia Pacific Index. The bank rose after reporting net income tripled to 501 billion yen ($6.5 billion) in the three months ended June 30 from 166 billion yen a year earlier, as gains from Morgan Stanley preferred shares outweighed a drop in loan income.

Of 288 companies in the MSCI Asia Pacific Index that have reported net income from July 11 through 6:15 p.m. in Tokyo today, 131 have exceeded analysts’ estimates while 94 have fallen short, according to data compiled by Bloomberg. Overall, earnings declined 11 percent, the data show.

Beating Earnings Estimates

“More and more companies are reporting earnings that exceed analysts’ estimates or raising profit forecasts, and that’s bringing a feeling of hope,” said Kazuhiro Takahashi, a general manager at Daiwa Securities Capital Markets Co. in Tokyo.

The MSCI Asia Pacific Index lost 0.7 percent this year through July 29, compared with a gain of 2.8 percent by the S&P 500 and a drop of 3.8 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 13.4 times estimated earnings on average, compared with 12.9 times for the S&P 500 and 10.8 times for the Stoxx 600.

Macau casino operators Galaxy Entertainment Group Ltd. (27) had the second-biggest advance on the Asia-Pacific gauge today, while Sands China Ltd. (1928) rose to its highest level since listing in Hong Kong in November 2009, after casino revenue in the former Portuguese colony rose 48 percent to 24.2 billion patacas ($3 billion) in July. Galaxy jumped 8.2 percent to HK$21.85 and Sands China jumped 5.8 percent to HK$24.80.

Itochu Techno-Solutions Corp. (4739), a computer-network-systems developer, surged 7.4 percent to 3,270 yen in Tokyo. The company said it plans to buy back up to 2.89 percent of its outstanding shares for as much as 5 billion yen, as well as retire 3.1 percent of its shares on Aug. 8.

Among stocks that fell, Formosa Petrochemical Corp. (6505) dropped 6.9 percent to NT$101. Chairman Wang Wen-chao and President Su Chi-yi announced their resignations after a fire broke out at a plant early on July 30. Formosa Chemicals & Fibre Corp. (1326) and Formosa Plastics Corp. (1301) also declined. The companies were among the biggest declining stocks on the MSCI Asia Pacific Index today.

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.

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