Firming hopes of a US deal to ensure the country does not default on its debt lifted world shares for a second day on Friday and left the dollar on course for its first weekly rise in five.
Republican lawmakers on Thursday offered a plan that would extend the US government’s borrowing authority for several weeks, staving off a default that could otherwise come as soon as October 17. While no deal emerged from a meeting with the Democrats at the White House, the two sides appeared ready to end a political crisis that has shuttered much of the US government for over a week and dented Washington’s image worldwide.
MSCI’s world shares index .MIWD00000PUS, which tracks stocks in 45 countries, was up almost 0.5 percent by mid-session in Europe as a 0.4 percent rise by European shares .FTEU3 followed a rally in Asian and US markets overnight. Stock futures pointed to modest gains of around 0.1 percent on Wall Street when trading resumes with investors expected to be cooler after the S&P 500 .SPX on Thursday enjoyed its best day since January.
One senior Republican politician said a US deal could be struck as early as Friday and Nick Beecroft, chairman of Saxo Capital Markets, said he expected a short-term agreement which would give 6 weeks of breathing space, by Tuesday at the latest. “I think when we see an agreement on the debt ceiling we will see the high in US Treasury yields drift down due to relief out of that and the stock market will probably do well,” Beecroft said, adding there were other implications for financial markets too.
“I think it lends even more support to what I am beginning to feel, which is that tapering is not going to happen until March. When the data eventually comes through, it will look so subdued that there will be no way the Fed’s hurdles (to start stimulus withdrawal) would have been met by December.”
That view saw the dollar .DXY slip back 0.2 percent against a basket of currencies. However, gains made earlier in the week left it on course for its first weekly rise since early September.
