Home ›› 31 May 2023 ›› World Biz
European stocks and oil prices gave up early gains Monday, but US stock futures stayed positive following weekend news of an agreement that could avert a catastrophic US debt default.
Germany’s DAX (DAX) closed 0.2% lower, with France’s CAC 40 (CAC40) falling by a similar margin after both posted gains earlier in the day. In Asia, Japan’s Nikkei 225 (N225) closed at a 33-year high, boosted by optimism over the debt ceiling deal and a weaker yen, which lifted exporters. The index has rallied nearly 20% this year.
US and UK markets are closed Monday for a holiday, affecting trading volumes in Europe. Dow futures and Nasdaq futures rose around 0.35%, with S&P 500 futures up 0.3%. US markets made gains Friday on reports that President Joe Biden and US House of Representatives Speaker Kevin McCarthy were nearing a deal to allow the US government to keep paying its bills.
They reached an agreement in principle Saturday to raise the debt ceiling for two years and cap spending. The deal moves the United States one step back from the brink of a historic default, which, if it were to happen, would upend stock and bond markets. It would also cause severe damage to the US and global economy.
Brent crude futures, the global oil benchmark, fell 0.5% to $76.58 a barrel, reversing gains of a similar magnitude earlier in the day. WTI crude, the US benchmark, fell 0.2% to trade at $72.51 a barrel.
Earlier, in Asia Pacific, Australia’s S&P/ASX 200 had closed 0.9% higher. China’s Shanghai Composite increased 0.3%. Hong Kong’s Hang Seng (HSI) Index opened higher, but then reversed gains to close 1% lower, dragged down by falls in technology and real estate stocks. South Korean markets were closed for a public holiday. While the US debt agreement has given markets cause for optimism, the work is far from done.
Now both leaders must sell the deal to their allies in Congress, where Republicans control the House and Democrats control the Senate. The deal must be passed before June 5, the crucial date when Treasury Secretary Janet Yellen says the US will no longer be able to pay its bills. Yellen provided an updated timeline Friday, after previously setting an earlier deadline of June 1.
The agreement seems to mark “a significant progress in the US debt ceiling situation,” said Jun Rong Yeap, an analyst at IG. Monday’s trading in Asia was a positive reaction to abating debt risks, he said. Global investors are also watching China’s PMI indexes scheduled to be released later this week, he added.
