European stocks rise on optimism over US debt ceiling talks

European stocks rose on Friday, catching the tail of an overnight rally on Wall Street, as chipmakers boosted markets and signs emerged from Washington that politicians were approaching a deal on the US debt ceiling.

Europe’s region-wide Stoxx 600 was up 0.5 per cent, France’s Cac 40 added 0.6 per cent and London’s FTSE 100 was 0.7 per cent higher at the open.

The moves come a day after Nvidia announced that its quarterly earnings far exceeded analysts’ expectations, bolstered by soaring demand for chips used in generative artificial intelligence systems.

Nvidia shares jumped 24 per cent on the day, putting the company on course to become the first chipmaker to be valued at more than $1tn. The rally spread to other AI-related stocks, helping the tech-heavy Nasdaq Composite finish 1.7 per cent higher. The benchmark S&P 500 rose 0.9 per cent.

Meanwhile, US president Joe Biden signalled late on Thursday that White House officials were “making progress” in negotiations over the US debt ceiling, as the looming deadline over an unprecedented government default stretched investors’ nerves.

Contracts tracking Wall Street’s benchmark S&P 500 and those tracking the tech-heavy Nasdaq 100 were both flat ahead of the New York open.

“While Nvidia is generating hype throughout the market, I don’t know how much that will, or should, matter if we go into the three-day weekend without a debt ceiling agreement,” said Mike Zigmont, head of research and trading at Harvest Volatility.

Earlier in the week, credit rating agency Fitch warned it could downgrade the country’s triple A rating because of the “brinkmanship” over the US debt limit.

The yield on Treasuries maturing in a month — close to the date when the US government could run out of money — was at 5.8 per cent on Friday, having slipped from a high of 6.01 per cent earlier in the week.

The yield on the policy-sensitive two-year bills rose 0.02 percentage points to 4.52 per cent. The yield on the benchmark 10-year note was flat at 3.81 per cent. Bond yields rise as prices fall.

Turkey’s lira fell to 20 against the US dollar for the first time, in the latest sign of the mounting pressure on the country’s economy ahead of Sunday’s runoff election. President Recep Tayyip Erdoğan, who has led Turkey for two decades, is expected to win this weekend’s second-round vote.

Oil prices rose following mixed messages from Opec+ member states about future production of the fuel. Brent crude, the international benchmark, rose 0.24 per cent to $76.44 per barrel, while West Texas Intermediate, the US equivalent, rose 0.4 per cent to $72.2.

Russian president Vladimir Putin and the country’s deputy prime minister had said that further production cuts were unlikely at the Opec+ meeting next month.

Asian stocks were mixed, with Hong Kong’s Hang Seng index falling 1.9 per cent while China’s CSI was flat.

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