European stocks rallied on Friday after investors took heart from US congressional passage of a deal to lift the country’s debt ceiling and suggestions from Federal Reserve officials that the central bank would halt interest rate rises.
Europe’s region-wide Stoxx 600 rose 0.5 per cent, extending gains from the previous day, while France’s Cac 40 added 0.7 per cent and Germany’s Dax was up 0.7 per cent in morning trade.
The moves came after the US Senate on Thursday approved a deal between the White House and congressional Republicans to lift the country’s $31.4tn debt ceiling for two years in exchange for cuts to government spending.
The accord ended a weeks-long political stand-off that risked triggering an unprecedented debt default in the world’s largest economy. The benchmark S&P 500 hit a nine-month high overnight.
“We can start moving forward with regards to focusing on what else matters . . . What matters is data and fundamentals at the end of the day,” said Georgios Leontaris, chief investment officer for Europe, Middle East and Africa at HSBC Global Private Banking.
Markets in Asia rallied. Hong Kong’s Hang Seng index led the region with a rise of 3.9 per cent, while China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks rose 1.4 per cent. South Korea’s Kospi gained 1.3 per cent and Japan’s Topix was up 1.6 per cent.
Investors will be closely watching the US unemployment report, to be published before Wall Street opens, which will offer an indication of the central bank’s path for monetary policy.
Data from the US labour department is expected to show that non-farm payrolls rose 190,000 in May, according to a consensus of estimates by Reuters.
A number of Fed officials have over the past week signalled their inclination to abstain from further tightening at the central bank’s next meeting, with the likelihood of a rate rise in June falling to 30 per cent.
Contracts tracking Wall Street’s benchmark S&P 500 and those tracking the tech-heavy Nasdaq 100 added 0.3 per cent ahead of the New York open. The moves come a day after both indices closed at their highest levels since August 2022.
A debt ceiling resolution also bolstered oil prices, with West Texas Intermediate, the US marker, adding 1.2 per cent to trade at $70.97 per barrel, while international benchmark Brent crude rose by 1.2 per cent to $75.22.
The dollar slipped 0.1 per cent against a basket of six other currencies.