Global equities rose on Thursday after the U.S. House of Representatives passed a bill to raise the federal debt ceiling, while U.S. Treasury yields fell as data reflected a cooling labor market that reduces the possibility of an interest rate hike by the Federal Reserve.
A bill that suspends the $31.4 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 U.S. Senate will follow up by considering the bill.
“It seemed to be a well-televised deal and investors were not only conditioned by the debt dramas of the last decade and they knew this was coming,” said David Klink, senior equity analyst at Huntington Private Bank. “So it was like, buy the rumor, sell the news.”
The MSCI world equity index, which tracks shares in almost 50 countries, added 1%. The pan-European STOXX 600 index (.STOXX) rose 0.78% 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, industrials and financials.
The Dow Jones Industrial Average (.DJI) rose 0.56% to 33,093.93; the S&P 500 (.SPX) gained 0.81% at 4,213.5; and the Nasdaq Composite (.IXIC) added 0.94% at 13,056.35.
U.S. Treasury yields fell after Labor Department data on Thursday showed U.S. worker productivity slumped in the first quarter, indicating an easing of the tight labor market and reducing the likelihood of a rate hike.
The yield on benchmark U.S. 10-year Treasury notes dropped to 3.605%, while the yield on the 30-year Treasury bond was down at 3.8348%.
The U.S. 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 0.47%, with the euro up 0.51% at $1.0743.
Oil prices were buoyed by optimism from the passage of the debt ceiling bill that could underpin consumer demand despite reports that U.S. crude inventories rose by about 5.2 million barrels last week.
Brent crude futures rose 3.13% to $74.87 a barrel while U.S. West Texas Intermediate crude (WTI) climbed 3.61% to $70.55 per barrel.
Gold gained 1% to a more than one-week peak on Thursday, as the dollar tumbled. Spot gold added 1.0% at $1,982.03 an ounce, while U.S. gold futures gained 0.85% at $1,980.50 an ounce.
