Berliner Boersenzeitung - Debt deal optimism fuels stocks gains

Wall Street stocks had jumped on Wednesday as investors were reassured that a deal would be done to avoid the US government defaulting on its massive debt that would likely trigger a cataclysm on markets.

That sent Asian markets higher as trading got under way on Thursday, with European stocks following in their wake.

While Wall Street opened mixed on Thursday, the three major indices all moved into the green in morning trading following fresh encouraging comments by US political leaders, although the Dow later dipped back into the red.

The lacklustre open in New York was due to divergent data.

"Market participants continue to contend with a lot of mixed signals that make it difficult to have a lot of conviction on both the buy side and the sell side," said market analyst Patrick O'Hare at Briefing.com.

Walmart posted better-than-expected first quarter results and raised its annual profit forecast, providing some reassurance about consumer spending despite high inflation hitting households.

But another US regional economic survey pointed to contraction and existing home sales fell for a second month running as higher mortgage rates make it more expensive to borrow.

Meanwhile, first-time unemployment claims fell last week to 242,000.

- 'Keep the market guessing' -

The strong labour market has been one reason the US Federal Reserve has ploughed on with its interest rate hikes, with worries it may tighten monetary policy too much and push the economy into recession.

The unemployment figures "will keep the market guessing about the Fed's monetary policy stance and the specter of the Fed overtightening", said O'Hare.

Another member of the US Federal Reserve's rate-setting committee indicated her support Thursday for an additional rate hike next month, underscoring divisions at the Fed over how aggressively to target inflation.

Dallas Fed president Lorie Logan joins three other member of the Federal Open Markets Committee (FOMC) -- which currently has just 11 voting members -- in indicating that the Fed may need to raise rates again on June 13-14.

The dollar rose further Thursday, having already made solid gains the previous day as investors sought shelter in the haven unit.

G7 leaders arrived in Hiroshima, Japan, for a key summit -- but the debt drama has already forced US President Joe Biden to cancel planned stops in Papua New Guinea and Australia, sparking hopes of a breakthrough.

"The Washington mood-music and President Biden's decision to cut short his trip to the G7 meeting have given markets hope that a debt limit solution will be forthcoming, improving the market mood, with equities higher and bond volatility fading away," noted Societe Generale analyst Kit Juckes.

Talks this week between Biden, House Speaker Kevin McCarthy and congressional leaders appear to have been fruitful, with McCarthy expressing hope that lawmakers will be able to vote on a deal next week.

"Confidence is growing that the melodrama playing out in Washington DC is merely a piece of political theatre, and that a deal will happen eventually, as it has on so many previous occasions," said CMC Markets analyst Michael Hewson.

Treasury Secretary Janet Yellen has warned that the US government would likely run out of cash by June 1 while the non-partisan Congressional Budget Office has forecast June 15.

- Key figures around 1530 GMT -

New York - Dow: DOWN 0.1 percent at 33,379.81 points

London - FTSE 100: UP 0.3 percent at 7,742.30 (close)

Frankfurt - DAX: UP 1.3 percent at 16,163.36 (close)

Paris - CAC 40: UP 0.6 percent at 7,446.89 (close)

EURO STOXX 50: UP 1.0 percent at 4,367.45 (close)

Tokyo - Nikkei 225: UP 1.6 percent at 30,573.93 (close)

Hong Kong - Hang Seng Index: UP 0.9 percent at 19,727.25 (close)

Shanghai - Composite: UP 0.4 percent at 3,297.32 (close)

Euro/dollar: DOWN at $1.0772 from $1.0840 on Wednesday

Pound/dollar: DOWN at $1.2410 from $1.2487

Dollar/yen: UP at 138.54 yen from 137.68 yen

Euro/pound: DOWN at 86.79 pence from 86.81 pence

Brent North Sea crude: DOWN 1.1 percent at $76.11 per barrel

West Texas Intermediate: DOWN 1.0 percent at $72.07 per barrel.

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(P.Werner--BBZ)