# Stocks reach one-month high on U.S. debt ceiling hopes
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-05-19
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Global shares rise on U.S. debt ceiling hopes
Meta Description: Global shares rise to one-month high as markets reflect increased hopes for deal over U.S. debt ceiling, avoiding calamitous default. Stay updated with Reuters.
URL: https://financedigest.com/stocks-reach-one-month-high-on-u-s-debt-ceiling-hopeshtml

![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-05-19t080002z1lynxmpej4i09rrtroptp4markets-stocks-europe-1736813993002-compressed.jpg)

# Stocks reach one-month high on U.S. debt ceiling hopes

By Naomi Rovnick and Ankur Banerjee

LONDON, SINGAPORE (Reuters) -Global shares rose to a one-month high and the dollar trounced major currencies on Friday as markets reflected increased hopes for a deal over the U.S. [debt ceiling](https://www.financedigest.com/wall-street-gains-treasury-yields-rise-as-debt-ceiling-talks-progress.html "Wall Street gains, Treasury yields rise as debt ceiling talks progress") that could avoid a calamitous default.

Europe’s STOXX 600 traded up 0.4%, while e-mini futures for the S&P 500 rose 0.2%, following a 0.9% [gain for the benchmark Wall Street](https://www.financedigest.com/dollar-gains-as-wall-street-retreats-on-future-fed-hikes.html "Dollar gains as Wall Street retreats on future Fed hikes") index overnight.

MSCI’s broadest index of [global shares](https://www.financedigest.com/global-share-sell-off-pauses-in-asia-as-investors-await-fed-policy-update.html "Global share sell off pauses in Asia as investors await Fed policy update") <.MIWD00000PUS> was up 0.1%, inching up to its strongest level [since April 19 and on course for its best weekly gain](https://www.financedigest.com/dollar-steadies-near-16-week-low-yuan-set-for-biggest-weekly-gain-since-2005.html "Dollar steadies near 16-week low, yuan set for biggest weekly gain since 2005") for more than a month.

Against a basket of currencies, the dollar was steady on the day, having hit its [highest since March](https://www.financedigest.com/russian-inflation-accelerates-to-7-61-m-m-in-march-highest-since-1999.html "Russian inflation accelerates to 7.61% m/m in March, highest since 1999") 20 earlier on. The bullishness on the U.S. currency sent the [euro to its lowest in almost two months](https://www.financedigest.com/sterling-hits-five-month-high-against-euro-before-boe-decision.html "Sterling hits five-month high against euro before BoE decision"), at $1.0771. Sterling, at $1.2405, was near its weakest since April 25.

The moves came after Democratic [negotiators told President Joe Biden they were making “steady progress” on a deal](https://www.financedigest.com/s-africa-negotiates-deal-with-eu-to-clear-citrus-blockage-at-ports.html "S.Africa negotiates deal with EU to clear citrus blockage at ports") to lift the U.S. debt ceiling and avoid a default by the world’s largest economy, whose currency and Treasury debt [markets underpin global trade and investment](https://www.financedigest.com/investing-age-infobesity-separating-sentiment-market-noise.html "Investing in an age of ‘infobesity’ – separating sentiment from market noise").

The U.S. government may [default](https://www.financedigest.com/oil-rebounds-on-fading-risk-of-u-s-debt-default.html "Oil rebounds on fading risk of U.S. debt default") on some debt as early as June 1 unless Congress votes to lift the debt ceiling, which has sparked fears of the nation sliding into a recession and raised questions over the global status of U.S. Treasury debt, a $23 trillion [market that is seen as providing the lowest-risk source of liquidity for companies](https://www.financedigest.com/automated-liquid-handling-systems-market-global-leading-companies-analysis-revenue-trends-and-forecasts-2027.html "Automated Liquid Handling Systems Market Global Leading Companies Analysis, Revenue, Trends and Forecasts 2027"), investors and central banks.

It’s a high risk but low probability event,” said Kevin Thozet, investment committee member at [European fund](https://www.financedigest.com/white-bullets-collaboration-with-polands-sygnal-association-significantly-reduces-ad-funded-piracy-in-key-european-market.html "White Bullet’s collaboration with Poland’s Sygnał Association significantly reduces ad-funded piracy in key European market") manager Carmignac, said of the debt ceiling.

“But U.S Treasuries are considered risk free, so the idea that they might not be is massive and that’s why this is [shaking markets.”](https://www.financedigest.com/meal-replacement-shakes-market-to-partake-significant-development-during-2020-2030.html "Meal Replacement Shakes Market to Partake Significant Development During 2020-2030 ")

Treasuries traded calmly on Friday, with the 10-year yield, which moves inversely to the price of the [debt](https://www.financedigest.com/understanding-company-debt-finance.html "Understanding company debt finance") and is used as a yardstick to value most other financial assets, down 3 basis points (bps) at 3.657%. The two year [yield was 6 bps lower](https://www.financedigest.com/wall-street-ends-lower-as-bond-yields-jump-on-growth-concerns.html "Wall Street ends lower as bond yields jump on growth concerns") at 4.22%. Germany’s equivalent Bund [yield was steady](https://www.financedigest.com/dollar-rebound-holds-as-yields-steady-ahead-of-jobs-data.html "Dollar rebound holds as yields steady ahead of jobs data") at 2.4%.

[Debt ceiling](https://www.financedigest.com/world-stocks-climb-on-hopes-of-successful-debt-ceiling-outcome.html "World stocks climb on hopes of successful debt ceiling outcome") relief complicates the outlook for U.S. government bonds, where yields broadly track Federal Reserve interest rates, as fading recession risk could prompt the world’s most influential [central bank to keep monetary policy tight as inflation](https://www.financedigest.com/central-banks-opt-for-shock-and-awe-to-tame-inflation.html "Central banks opt for shock and awe to tame inflation") remains high.

The [Fed has lifted borrowing costs at each meeting](https://www.financedigest.com/putin-speech-sends-sterling-to-fresh-37-year-low-ahead-of-fed-boe-meetings.html "Putin speech sends sterling to fresh 37-year low ahead of Fed, BoE meetings") since March 2022, bringing them from near zero to a 5.00-5.25% range as of early this month.

Markets are now pricing in a 36% chance of a 25 bps hike when the [Fed meets](https://www.financedigest.com/dollar-dips-as-job-openings-fall-fed-meeting-in-focus.html "Dollar dips as job openings fall, Fed meeting in focus") next month, compared with 10% chance a week ago, CME’s FedWatch tool showed.

Data overnight showed fewer-than-expected Americans filed initial jobless claims last week, lowering odds that the Fed will [cut rate](https://www.financedigest.com/russias-2022-inflation-seen-at-13-4-more-rate-cuts-to-come-reuters-poll.html "Russia’s 2022 inflation seen at 13.4%, more rate cuts to come: Reuters poll") before year-end.

[Investors will parse comments from Fed Chair Jerome Powell’s](https://www.financedigest.com/dollar-edges-lower-as-investors-wait-on-feds-powell.html "Dollar edges lower as investors wait on Fed’s Powell") panel discussion later on Friday for more clues over the future path of interest rates.

Elsewhere in markets, Japan’s Nikkei 225 hit its highest since 1990, reflecting debt ceiling optimism as [well as the fact global investors are returning to Japan as its economy and corporate governance improve](https://www.financedigest.com/finance-transformation-cloud-solutions-can-catalyst-process-improvement-well-driver-business-transformation.html "Finance Transformation: How cloud solutions can be a catalyst for process improvement as well as a driver of business transformation.").

Brent crude was at $76.63, up 1% on the day, while copper rose 0.8% to $8,235 a tonne.

Spot gold added 0.4% to trade at $1.968 an ounce.

(Reporting by Naomi Rovnick and Ankur Banarjee; Editing by Sam Holmes and Kim Coghill)


---
This blog is powered by Superblog. Visit https://superblog.ai to know more.
---