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Global stocks surge on US debt breakthrough

#Global #stocks #surge #debt #breakthrough

World stocks rallied Friday after senators voted to suspend the US debt ceiling in an 11th-hour deal, eliminating the threat of a potentially catastrophic default.

London, Paris and Frankfurt bourses leapt after bumper gains in Asia and on Wall Street, as investors welcomed news that the world’s biggest economy would not run out of money to pay its bills.

Hammered out between Democratic President Joe Biden and the Republicans, the measure passed the Senate on Thursday with a comfortable majority of 63 votes to 36 a day after it had sailed through the House of Representatives, ending months of wrangling. 

“The Senate swiftly approved the new debt ceiling deal in the US prompting relief in the markets,” said AJ Bell investment director Russ Mould.

“A bigger bounce might have been forthcoming had investors not already been very much factoring in an agreement, with only a modest sell-off around the crisis.”

Oil prices meanwhile jumped as traders eyed a weekend output meeting of the OPEC+ grouping of crude producers.

London stocks were also lifted after pet care firm Dechra Pharmaceuticals agreed to a £4.5-billion ($5.6-billion) takeover by Swedish private equity firm EQT and the Abu Dhabi Investment Authority.

– Fed boost –

Attention has meanwhile returned to the US central bank’s drive to defeat decades-high inflation.

There are increasing hopes that the US Federal Reserve will decide against lifting interest rates this month as officials assess the impact of more than a year of tightening.

Traders also welcomed data Thursday that showed private hiring slowed in May — albeit at a slower pace than forecast — and wage growth eased for a second straight month.

The news bodes well for the release of the more closely followed non-farm payrolls figure, which the Fed uses as one of its crucial guides for monetary policy.

“Markets are ending the week on a positive note, as traders turn their attention to the US jobs report,” said OANDA analyst Craig Erlam.

“We’re hearing some positive noises from the Fed in recent days around the prospect of a pause in order to allow more time for the data to moderate and be fully analysed but even so, another red hot jobs report today may be impossible to ignore.”

Monetary policy officials have said a softer labour market and much lower inflation were key to the bank being able to stop lifting borrowing costs.

Expectations were already running high that the Fed will hold its horses on rates for the first time in more than a year when it meets later this month, but comments from two officials added to the optimism.

Analysts said there was now a 24-percent chance of a Fed hike, compared with 69 percent priced in last Friday.

– Key figures around 1100 GMT – 

London – FTSE 100: UP 0.9 percent at 7,561.05 points

Paris – CAC 40: UP 1.2 percent at 7,223.97

Frankfurt – DAX: UP 1.1 percent at 16,028.33

EURO STOXX 50: UP 1.1 percent at 4,260.18

Tokyo – Nikkei 225: UP 1.2 percent at 31,524.22 (close)

Hong Kong – Hang Seng Index: UP 4.0 percent at 18,949.94 (close)

Shanghai – Composite: UP 0.8 percent at 3,230.07 (close)

New York – Dow: UP 0.5 percent at 33,061.57 (close)

Euro/dollar: UP at $1.0772 from $1.0762 on Thursday

Dollar/yen: UP at 138.90 yen from 138.80 yen

Pound/dollar: UP at $1.2532 from $1.2526

Euro/pound: UP at 85.95 pence from 85.91 pence

Brent North Sea crude: UP 1.4 percent at $75.35 per barrel

West Texas Intermediate: UP 1.4 percent at $71.06 per barrel

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