San Francisco Frontiers - Asian stocks struggle as US shutdown rally loses steam

Equities started the week on the front foot after US lawmakers reached a deal to reopen the government after more than 40 days, adding to a revival of demand for tech giants despite growing fears of an AI-fuelled bubble.

Senators on Capitol Hill passed the compromise budget measure on Monday after a group of Democrats broke with their party to side with Republicans on a bill to fund departments through January.

It is hoped the bill will then pass the Republican-held House of Representatives and head to Donald Trump's desk, with some suggesting the government could reopen Friday.

"It appears to us this morning that our long national nightmare is finally coming to an end, and we're grateful for that," House Speaker Mike Johnson told reporters.

And the US president told reporters in the Oval Office that "we'll be opening up our country very quickly," adding that "the deal is very good."

Investors had grown increasingly concerned about the impact of severe disruptions of food benefits to low-income households, and of air travel heading into the Thanksgiving holiday.

It has also meant key official data on a range of things, including inflation and jobs, has not been released, leaving traders to focus on private reports for an idea about the economy.

The lack of crucial data has also meant the Federal Reserve has been unable to gauge properly whether or not to cut interest rates at its next meeting in December, keeping investors guessing.

Asian markets started Tuesday by extending Monday's gains as well as a rally on Wall Street, but struggled to maintain momentum going into the afternoon.

Tokyo, Hong Kong, Sydney, Shanghai, Taipei, Manila, Mumbai, Bangkok and Wellington all fell, while Seoul gave up its initial strong gains to sit slightly higher.

Sentiment was also weighed by a report in the Wall Street Journal saying China planned to exclude firms linked to the US military from gaining access to rare earths.

The report comes after Trump and Chinese counterpart Xi Jinping had agreed a deal to secure supplies of the minerals critical for the defence, automotive and consumer electronics sectors.

Beijing's tightening control over their export this year has snarled supply chains and halted production globally while sweeping measures introduced last month saw the US leader threaten blanket 100 percent tariffs.

"The US had handed off a bright baton: government shutdown resolved, liquidity set to re-enter the bloodstream, and equities roaring on cue. Yet Asia hesitated," wrote Stephen Innes at SPI Asset Management.

"It was a reminder that in this cycle, optimism doesn't always travel well across time zones."

Michael Brown at Pepperstone said reopening the US government would allow markets "to re-focus on what remains a solid bull case of the underlying economy remaining robust, earnings growth proving resilient, the monetary backdrop continuing to loosen and a calmer tone being taken on trade".

But, he warned, "the assumptions underpinning that bull case will now come under the microscope."

In corporate news, Japanese titan Sony soared 5.5 percent after it hiked its full-year profit forecasts thanks to the latest "Demon Slayer" anime blockbuster.

It also cited higher expected sales of its PlayStation games console and a smaller-than-expected impact from US tariffs as reasons for the improved outlook.

- Key figures at 0705 GMT -

Tokyo - Nikkei 225: DOWN 0.1 percent at 50,842.93 (close)

Hong Kong - Hang Seng Index: DOWN 0.1 percent at 26,615.23

Shanghai - Composite: DOWN 0.4 percent at 4,002.76 (close)

Euro/dollar: DOWN at $1.1554 from $1.1563 on Monday

Pound/dollar: DOWN at $1.3160 from $1.3182

Dollar/yen: UP at 154.20 yen from 154.03 yen

Euro/pound: DOWN at 87.78 pence from 88.00 pence

West Texas Intermediate: DOWN 0.4 percent at $59.87 per barrel

Brent North Sea Crude: DOWN 0.4 percent at $63.81 per barrel

New York - Dow: UP 0.8 percent at 47,368.63 (close)

London - FTSE 100: UP 1.1 percent at 9,787.15 (close)

P.Adams--SFF