News / Economy

    US Debt Deal Optimism Boosts Shares, Dollar

    The German share price index DAX board is pictured shortly after the curve reached a new all-time high at the stock exchange in Frankfurt, Oct. 15, 2013.
    The German share price index DAX board is pictured shortly after the curve reached a new all-time high at the stock exchange in Frankfurt, Oct. 15, 2013.
    Reuters
    Signs of a deal to avert an economically damaging U.S. debt default boosted world equities and the dollar on Tuesday, though firm short-term interest rates highlighted concerns that the problem may just be postponed.

    Hopes of a deal rose after U.S. Senate Majority Leader Harry Reid, a Democrat, and his Republican counterpart, Mitch McConnell, ended a day of talks on Monday, with Reid saying they had made “tremendous progress.”

    While markets remain wary over the eventual outcome, the signs of a last-minute compromise were enough to lift Europe's blue chip index, the Euro STOXX 50 to a 2-1/2-year high and sent shares in Asia to five-month highs.

    U.S. stock index futures signaled a mixed start on Wall Street with a weak earnings report from Citigroup likely to pressure the broad S&P 500 index which is lying just below a record high.

    “The consensus is bullish, everyone believes that a deal will be reached,” said Guillaume Dumans, co-head of research firm 2Bremans.

    The gains around the world lifted MSCI's world equity index, which tracks shares in 45 countries, by 0.15 percent, leaving it just three points away from a five-year high hit in September prior to the crisis in Washington.

    Fears linger

    However, the reaction in the U.S. Treasury bill market was more muted as sources close to the negotiations revealed that the plans under discussion may only free the government to borrow more money to fund itself until mid-February 2014.

    U.S. Treasury one-month bill yields were yielding around 20 basis points, down 5.5 bps on the day but well up from 2.5 bps on Sept. 30 just before the fiscal deadlock in Washington forced the government to begin a partial shutdown.

    “There seems to be some progress being made but the solution that is being proposed is far from perfect. It's short-term, it's just pushing the problem further along for a few months,” Philip Tyson, strategist at ICAP, said.

    The dollar shared some of the optimism over the prospects of a last-minute deal emerging this week, gaining 0.5 percent to hit a one-month high against a basket of major currencies .

    Against the safe-haven Swiss franc, the dollar was also at a one-month peak, at 0.9160 francs, but it was little changed versus the yen, another refuge in times of uncertainty, at 98.50 yen.

    The gains in the dollar may be limited as the government shutdown is expected to have hurt the U.S. economic recovery, and has convinced many that the Federal Reserve will have to extend its monetary stimulus into next year.

    “If we get some kind of temporary resolution in the U.S. it will still have a small positive short-term impact on the dollar. But in the medium term this is clearly dollar-negative,” said Richard Falkenhall, currency strategist at SEB.

    Elsewhere in the currency market, the Australian dollar jumped to a four-month high when minutes of the central bank's October 1 meeting revealed it was prepared to cut interest rates further though it was in no hurry to act.

    European recovery

    In Europe an unexpected rise in German analyst and investor sentiment lifted the outlook for the region's largest economy.

    The influential ZEW Institute's monthly poll of economic sentiment rose to its highest level since April 2010 and beat a Reuters poll forecast for no change.

    The ZEW data had scant impact on the euro, however. It was down 0.5 percent at $1.35, near the bottom of its recent range trading band of $1.35 to $1.36.

    German 10-year government bond yields were at their highest levels in three weeks, up 3 basis points at 1.89 percent , though most of the move came before the ZEW data.

    A separate report on price pressures in Britain showed inflation was higher than expected in September and house prices had risen sharply, adding to doubts over how long the central bank can hold down interest rates.

    Commodities slide

    Gold, whose safe-haven appeal is usually burnished during times of uncertainty, fell to a fresh three-month low. It shed 0.8 percent to $1,262 an ounce.

    Oil prices gained some support from the encouraging U.S. budget negotiations but were under pressure from talks in Geneva over Iran's nuclear program that might eventually lead to a pick-up in Iranian oil shipments.

    Brent crude futures were trading down 83 cents at $110.26 a barrel at 1215 GMT, after ending lower in the two previous sessions.

    You May Like

    Greenpeace Leak: US-EU Trade Deal Would Favor Corporations

    Activist group leaks classified documents to 'shine a light' on talks that could create the world's largest bilateral trade and investment pact

    Video Ethiopia's Drought Takes Toll on Children

    East African country’s crops failed in 2015, creating food shortages for 10 million – including 6 million children whose development may be compromised

    What Your First Name Reveals About Who You Vote For

    People named Chad are more likely to be Republicans and Jonathans are usually Democrats

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Turkish Kurd Islamist Rally Stokes Tensionsi
    X
    April 29, 2016 12:28 AM
    In a sign of the rising power of Islamists in Turkey, more than 100,000 people recently gathered in Diyarbakir, the main city in Turkey’s predominantly Kurdish southeast, to mark the birthday of the Prophet Muhammad. The gathering highlighted tensions with the pro-secular Kurdish nationalist movement. Dorian Jones reports from Diyarbakir.
    Video

    Video Turkish Kurd Islamist Rally Stokes Tensions

    In a sign of the rising power of Islamists in Turkey, more than 100,000 people recently gathered in Diyarbakir, the main city in Turkey’s predominantly Kurdish southeast, to mark the birthday of the Prophet Muhammad. The gathering highlighted tensions with the pro-secular Kurdish nationalist movement. Dorian Jones reports from Diyarbakir.
    Video

    Video Pakistani School Helps Slum Kids

    Master Mohammad Ayub runs a makeshift school in a public park in Islamabad. Thousands of poor children have benefited from his services over the years, but, as VOA's Ayesha Tanzeem reports, roughly 25 million school-age youths don't get an education in Pakistan.
    Video

    Video Florida’s Weeki Wachee ‘Mermaids’ Make a Splash

    Since 1947, ‘mermaids’ have fascinated tourists at central Florida’s Weeki Wachee Springs State Park with their fluid movements and synchronized ballet. Performing underwater has its challenges, including cold temperatures and a steady current, as VOA’s Lin Yang and Joseph Mok report.
    Video

    Video Somali, African Union Forces Face Resurgent Al-Shabab

    The Islamic State terror group claimed its first attack in Somalia earlier this week, though the claim has not been verified by forces on the ground. Meanwhile, al-Shabab militants have stepped up their attacks as Somalia prepares for elections later this year. Henry Ridgwell reports there are growing frustrations among Somalia’s Western backers over the country’s slow progress in forming its own armed forces to establish security after 25 years of chaos.
    Video

    Video Bangladesh Targeted Killings Spark Wave of Fear

    People in Bangladesh’s capital are expressing deep concern over the brutal attacks that have killed secular blogger, and most recently a gay rights activist and an employee of the U.S. embassy. Xulhaz Mannan, an embassy protocol officer and the editor of the country’s only gay and transgender magazine Roopban; and his friend Mehboob Rabbi Tanoy, a gay rights activist, were hacked to death by five attackers in Mannan’s Dhaka home earlier this month.
    Video

    Video Documentary Tells Tale of Chernobyl Returnees

    Ukraine this week is marking the 30th anniversary of the world's worst nuclear accident, at the Chernobyl nuclear power plant. Soviet officials at first said little about the accident, but later evacuated a 2,600-square-kilometer "exclusion zone." Some people, though, came back. American directors Holly Morris and Anne Bogart created a documentary about this faithful and brave community. VOA's Tetiana Kharchenko reports from New York on "The Babushkas of Chernobyl." Carol Pearson narrates.
    Video

    Video Nigerians Feel Bite of Buhari Economic Policy

    Despite the global drop in the price of oil, Nigerian President Muhammadu Buhari has refused to allow the country's currency to devalue, leading to a shortage of foreign exchange. Chris Stein reports from Lagos businessmen and consumers are feeling the impact as the country deals with a severe fuel shortage.
    Video

    Video  Return to the Wild

    There’s a growing trend in the United States to let old or underused golf courses revert back to nature. But as Erika Celeste reports from one parcel in Grafton, Ohio, converting 39 hectares of land back to green space is a lot more complicated than just not mowing the fairway.
    Video

    Video West Urges Unity in Libya as Migrant Numbers Soar

    The Italian government says a NATO-led mission aimed at stemming the flow of migrants from Libya to Europe could be up and running by July. There are concerns that the number of migrants could soar as the route through Greece and the Balkans remains blocked. Western powers say the political chaos in Libya is being exploited by people smugglers — and they are pressuring rival groups to come together under the new unity government. VOA's Henry Ridgwell reports.
    Video

    Video Russia’s TV Rain Swims Against Tide in Sea of Kremlin Propaganda

    Russia’s media freedoms have been gradually eroded under President Vladimir Putin as his government has increased state ownership, influence, and restrictions on critical reporting. Television, where most Russians get their news, has been the main target and is now almost completely state controlled. But in the Russian capital, TV Rain stands out as an island in a sea of Kremlin propaganda.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.8769
    JPY
    USD
    107.28
    GBP
    USD
    0.6842
    CAD
    USD
    1.2528
    INR
    USD
    66.384

    Rates may not be current.