LONDON: Stock markets around the world rallied Thursday as a deal looked set to temporarily resolve a political logjam that threatens to push the United States into defaulting on its debt. The dollar was mixed against its main rivals ahead of key US jobs data due Friday.
"The ceiling for the stock market's rebound effort has been raised" thanks to progress by US senators towards an agreement to raise the nation's borrowing limit for two months, said market analyst Patrick O'Hare at Briefing.com.
The potential deal would be a breakthrough in a partisan standoff that risked leaving the United States unable to service its debt after the estimated deadline of October 18, which would have shattered the US economy and led to a global recession.
Wall Street's main indices all showed gains of around 1.5 percent in late morning trading.
European markets closed with similar gains and Asian equities also ended higher.
"The market gets a little breathing room for now in the idea that a default situation will be avoided until at least December, yet it remains saddled with an understanding that this is just a kick-the-can down the road approach that could still kick it in the can sometime in December if neither side blinks at that time," added O'Hare.
A decision by US President Joe Biden and Chinese leader Xi Jinping to hold a virtual meeting also provided a much-needed boost to trading floors that have been starved of good news in recent days.
Economies have battled a string of problems in recent weeks, including surging inflation, an expected beginning of reduction in economic stimulus and a growing energy crisis.
The cost of a barrel of oil has roared higher as the global economy reopens from Covid-19 lockdowns, while the approaching northern hemisphere winter has led to the price of natural gas doubling from last month.
Some of the concerns about an imminent supply crunch have been eased by signals from Russia that it will supply more gas and that the United States government could release oil from its strategic reserves.
But the run-up in the energy market has ramped up fears that it will further fuel inflation, forcing central banks to wind in their ultra-loose monetary policies earlier than envisaged to prevent prices from running out of control.
Investors are now looking towards the release Friday of US non-farm payroll data for its impact on the Federal Reserve.
"This month's US jobs report will likely only have to clear the lowest of hurdles to keep the Fed on track" to begin reducing stimulus as soon as next month, said Matt Weller, global head of research at FOREX.com and City Index.
Comments
Comments are closed.