Wall Street futures jump on optimism over debt ceiling deal

Wall Street futures rose sharply on Tuesday as traders were encouraged by news that US policymakers had agreed a deal on the debt ceiling with a bill set to face Congress this week.

Contracts tracking the technology-heavy Nasdaq 100 advanced 1.4 percent ahead of the New York open, while those tracking the benchmark S&P 500 added 0.7 percent, reaching their highest level since August.

The increase was boosted by Saturday’s deal between US lawmakers and the White House that would extend the country’s $31.4tn debt ceiling for two years, until after the next presidential election in late 2024.

Although the bipartisan bill still needs to pass both chambers of Congress in the coming week, traders prepared for the first vote in the House on Wednesday, hoping to ease pressure on the US Treasury.

The yield on policy-sensitive two-year bills fell 0.08 percentage points to 4.51 per cent. The yield on the 10-year benchmark note fell 0.11 per cent to 3.71 per cent. Bond yields fall when prices rise.

Meanwhile, in Europe, Germany’s DAX rose 0.5 per cent, boosted by strong technology and energy sector performance, although the CAC 40 declined 0.4 per cent and the FTSE 100 shed 0.5 per cent. The Stoxx 600 was flat across the board.

Chris Beauchamp, chief market analyst at IG Group, said last week’s rally in technology stocks drove the Dax “up a bit more”, driven by growing excitement around the AI ​​industry.

“The Nasdaq and the Dax aren’t really clear bedrocks, but they seem to be at the moment,” he said.

The Turkish lira weakened to 20.39 against the US dollar in forex markets, hitting a new record low after President Recep Tayyip Erdoğan won the country’s election over the weekend.

Meanwhile, the Hang Seng China Enterprises index was down during Asian trade on Tuesday, down 20 per cent from its high in January. This temporarily placed it in bear market territory, though it later closed up 0.5 percent.

China’s benchmark CSI 300 index of Shanghai- and Shenzhen-listed stocks was also down more than 10 percent from its peak this year, matching the technical definition of a market correction, though it also closed modestly later.

Chinese shares came under pressure after rising concerns over the outlook for the world’s second-largest economy as tensions escalate between Washington and Beijing.

The continued selloff reflects a growing consensus among investors that the country’s economic recovery is losing momentum nearly half a year after Beijing abandoned President Xi Jinping’s disruptive zero-Covid 19 policy.

Winnie Wu, China equity strategist at Bank of America, said clients had described many Chinese stocks as “less than very cheap but not good enough to go long”.

Wu said that while valuations for China’s stocks had become attractive, the recovery remained weaker than anticipated and the economy was likely to continue to underperform without more substantial state support.

Wall Street futures rose sharply on Tuesday as traders were encouraged by news that US policymakers had agreed a deal on the debt ceiling with a bill set to face Congress this week.

Contracts tracking the technology-heavy Nasdaq 100 advanced 1.4 percent ahead of the New York open, while those tracking the benchmark S&P 500 added 0.7 percent, reaching their highest level since August.

The increase was boosted by Saturday’s deal between US lawmakers and the White House that would extend the country’s $31.4tn debt ceiling for two years, until after the next presidential election in late 2024.

Although the bipartisan bill still needs to pass both chambers of Congress in the coming week, traders prepared for the first vote in the House on Wednesday, hoping to ease pressure on the US Treasury.

The yield on policy-sensitive two-year bills fell 0.08 percentage points to 4.51 per cent. The yield on the 10-year benchmark note fell 0.11 per cent to 3.71 per cent. Bond yields fall when prices rise.

Meanwhile, in Europe, Germany’s DAX rose 0.5 per cent, boosted by strong technology and energy sector performance, although the CAC 40 declined 0.4 per cent and the FTSE 100 shed 0.5 per cent. The Stoxx 600 was flat across the board.

Chris Beauchamp, chief market analyst at IG Group, said last week’s rally in technology stocks drove the Dax “up a bit more”, driven by growing excitement around the AI ​​industry.

“The Nasdaq and the Dax aren’t really clear bedrocks, but they seem to be at the moment,” he said.

The Turkish lira weakened to 20.39 against the US dollar in forex markets, hitting a new record low after President Recep Tayyip Erdoğan won the country’s election over the weekend.

Meanwhile, the Hang Seng China Enterprises index was down during Asian trade on Tuesday, down 20 per cent from its high in January. This temporarily placed it in bear market territory, though it later closed up 0.5 percent.

China’s benchmark CSI 300 index of Shanghai- and Shenzhen-listed stocks was also down more than 10 percent from its peak this year, matching the technical definition of a market correction, though it also closed modestly later.

Chinese shares came under pressure after rising concerns over the outlook for the world’s second-largest economy as tensions escalate between Washington and Beijing.

The continued selloff reflects a growing consensus among investors that the country’s economic recovery is losing momentum nearly half a year after Beijing abandoned President Xi Jinping’s disruptive zero-Covid 19 policy.

Winnie Wu, China equity strategist at Bank of America, said clients had described many Chinese stocks as “less than very cheap but not good enough to go long”.

Wu said that while valuations for China’s stocks had become attractive, the recovery remained weaker than anticipated and the economy was likely to continue to underperform without more substantial state support.