NEW YORK, June 2 ― Global equities rose yesterday after the US House of Representatives passed a bill to raise the federal debt ceiling, while US Treasury yields fell as data reflected a cooling labour market that reduces the possibility of an interest rate hike by the Federal Reserve.
A bill that suspends the US$31.4 trillion (RM144.8 trillion) debt ceiling ― and averts a catastrophic government default ― sailed through the House of Representatives on Wednesday after a majority of both Democrats and Republicans backed the measure despite opposition from hardline members of both parties. The US Senate will follow up by considering the bill.
David Klink, senior equity analyst at Huntington Private Bank, said the debt-ceiling deal seems to have been well-telegraphed, with investors ― conditioned by the debt dramas of the past decade - knowing it was coming.
“So it was like, buy the rumour, sell the news,” Klink said.
The MSCI world equity index, which tracks shares in almost 50 countries, added 1.1 per cent. The pan-European STOXX 600 index rose 0.78 per cent after closing at a two-month low in the previous session.
On Wall Street, all three main indexes rose, led by stocks in technology, communication services, healthcare, industrials and financials.
The Dow Jones Industrial Average rose 0.47 per cent to 33,061.57, the S&P 500 gained 0.99 per cent to 4,221.02 and the Nasdaq Composite added 1.28 per cent to 13,100.98.
US Treasury yields fell after Labour Department data yesterday showed US worker productivity slumped in the first quarter, indicating an easing of the tight labour market and reducing the likelihood of a rate hike.
The yield on benchmark US 10-year Treasury notes dropped to 3.607 per cent, while the yield on the 30-year Treasury bond was down at 3.826 per cent.
The US dollar drifted from a two-month high as investors trimmed bets based on lower rate hike expectations, while the euro recovered from a two-month low after European Central Bank (ECB) President Christine Lagarde said inflation remained too high and further policy tightening was necessary.
The dollar index fell 0.586 per cent, with the euro up 0.68 per cent to US$1.0761.
Oil prices were buoyed by optimism from the passage of the debt ceiling bill that could underpin consumer demand despite reports that US crude inventories rose by about 5.2 million barrels last week.
Brent crude futures settled up 2.3 per cent to US$74.65 a barrel, their biggest daily gains since May 17. US West Texas Intermediate crude (WTI) climbed 3 per cent to settle at US$70.10 a barrel, recording its biggest daily gains since May 5.
Gold gained nearly 1 per cent to a more than one-week peak yesterday, as the dollar tumbled. Spot gold added 0.8 per cent to US$1,978.01 an ounce, while US gold futures gained 0.73 per cent to US$1,978.30 an ounce. ― Reuters
