Global shares rose Thursday, tracking a rally on Wall Street spurred by signs of progress on resolving the standoff in Congress over the federal debt ceiling.
France's CAC 40 added 1.1% in early trading to 6,567.22, while Germany's DAX was up 1.1% at 15,143.67. Britain's FTSE 100 rose 0.8% to 7,051.44. The future for the Dow industrials gained 0.4% to 34,438.00. That for the S&P 500 was up 0.6% at 4,379.50.
Investors are hoping the US Congress may manage to temporarily extend the federal government’s debt ceiling a nd buy lawmakers time to reach a more permanent resolution. The market recovered from a morning loss on Wednesday shortly after Senate Republican leader Mitch McConnell offered Democrats an emergency short-term extension to the federal debt ceiling into December.
If the nation’s debt ceiling, which caps the amount of money the federal government can borrow, isn’t raised by Oct. 18, the country “would likely face a financial crisis and economic recession,” Treasury Secretary Janet Yellen told Congress last week.
An agreement in principle between US and Chinese envoys on a virtual meeting between President Joe Biden and his Chinese counterpart Xi Jinping also brightened the mood, said The Associated Press.
Any progress, however slight, toward easing tensions between the two biggest economies would alleviate some of the uncertainty overhanging markets.
Markets have been bouncing as investors question the economy’s path forward, amid rising inflation and the ongoing impact from the virus pandemic.
Japan's benchmark Nikkei 225 gained 0.5% to finish at 27,678.21. Australia's S&P/ASX 200 added 0.7% to 7,256.70. South Korea's Kospi jumped 1.8% to 2,959.46. Hong Kong's Hang Seng surged 3.1% to 24,701.73. Trading was closed in Shanghai for a Chinese national holiday.
Stephen Schwartz, a senior director at Fitch, said he believes the regional economy will start to recover with the growing vaccination efforts in Asia, which will lead to a lifting of restrictions to curb the spread of the coronavirus.
But South and Southeast Asia, where vaccination rollouts have lagged, remain vulnerable to COVID-19 “pandemic-related setbacks." Recent problems in China's property sector are another risk, he added.
“Slower growth in China, together with the tapering we expect by the US Fed, could have broader negative repercussions, especially for the region’s emerging and frontier markets,” he said.
Japan's economic prospects also remain murky as new Prime Minister Fumio Kishida gives his first policy speech later this week. Although he has promised to boost incomes, he has not outlined specifics and is not widely perceived as a proponent of the regulatory and structural changes analysts have long said Japan sorely needs. Some skeptics worry that any new spending will merely push the country into deeper debt.
The Federal Reserve’s timetable for raising interest rates is another concern. The Fed’s policymaking committee recently signaled the central bank could start raising rates late next year. Analysts have said that the Fed could act sooner than expected if high inflation persists.
Investors will get a closer look at how companies fared in the third quarter when quarterly financial results are released over the coming weeks. Wall Street is expecting solid profit growth of 27% for S&P 500 companies, but will also be listening for commentary on how supply chain problems and higher costs are crimping operations.
On Friday, the Labor Department will release its anticipated employment report for September. The labor market has been slow to fully recover from the pandemic and the summer surge in COVID-19 cases further impeded its progress.
In energy trading, benchmark US crude slipped $1.76 to $75.67 a barrel in electronic trading on the New York Mercantile Exchange. It gave up $1.50 to $77.43 per barrel on Wednesday. Brent crude, the international standard, fell $1.33 to $79.75 a barrel.
In currency trading, the US dollar inched up to $111.44 Japanese yen from 111.41 yen. The euro rose to $1.1558 from $1.1557.
