adminWASHINGTON. — US stocks jumped more than 1 percent in early trade yesterday as expectations rose for a last-minute deal between Washington politicians to avoid the country defaulting on its debt. Thirty minutes into trade, the Dow Jones Industrial Average was up 172,68 points (1,14 percent) at 15 340,69.
The broader S&P 500 rose 18,62 (1,10 percent) to 1,716 68, and the Nasdaq Composite gained 37,35 (0,98 percent) at 3,831 36.
Fresh third-quarter earnings from a number of companies had a mixed impact.
Dow component Intel lost 0,5 percent after it cuts its forecast for the rest of the year. For the third quarter the chipmaker beat forecasts slightly.
Railway operator CSX fell 0,5 percent despite a 1,8 percent gain in quarterly profits. The company pointed out a significant drop in the volume of coal it hauls.
Yahoo picked up 1,9 percent after announcing it would hold on to a larger chunk of Chinese e-commerce powerhouse Alibaba than originally planned, as Alibaba goes public.
Pepsico shares were up 1,7 percent despite third-quarter earnings of US$1,91 billion that were barely higher than a year earlier.
Bank of America rose by 1,4 percent as it beat forecasts for its third quarter, helped by a fall in provisions for soured loans.
Apple shares were 0,3 percent higher despite reports that it had cut back orders for its new iPhone 5C due to slow demand in the market for the smartphone.
Bond prices fell. The 10-year Treasury yield rose to 2,74 percent from 2,72 percent late on Tuesday, while the 30-year increased to 3,80 percent from 3,78 percent.
Meanwhile in Europe, European stock markets showed increasing nervousness yesterday, with US lawmakers taking deadlock over avoiding a disastrous default to the last hours of a deadline.
Sentiment was rattled further as ratings agency Fitch placed the United States on warning for a downgrade from its top-level AAA assessment.
In afternoon deals, London’s FTSE 100 index dropped 0,17 percent to 6 537,98 points, Frankfurt’s DAX 30 dipped 0,05 percent to 8 800,09 points and the CAC 40 in Paris reversed 0,30 percent to 4 243,10 compared with Tuesday’s closing values.
The United States yesterday stood hours from a fateful fiscal deadline, with a chaotic political standoff threatening to trigger a debt default and rock the global economy.
“Lawmakers in the US have today (yesterday) to whack out a deal to lift the country’s borrowing limit,” said ETX Capital analyst Ishaq Siddiqi.
“Many in the market expect an eleventh hour agreement to be announced, much like at the end of 2012 when politicians averted the fiscal cliff.”
Hopes that Congress would agree to raise the government’s borrowing authority as required by midnight yesterday rested with last gasp talks in the Senate.
The European single currency meanwhile firmed to US$1 3557, compared with US$1,3525 late in New York on Tuesday.
“The eve of the deadline is failing to generate much excitement in the foreign exchange space,” Forex.com research director Kathleen Brooks told AFP.
“Volatility remains low because (there is) too much uncertainty to fuel a direction one way or the other.”
She added: “There is still a potential for a deal to be struck, but no one wants to count their chickens just in case there is not.”
Asian equities experienced mixed trading with all eyes on Washington, amid doubts over whether Congress would eventually reach an agreement to fund the government, dealers said. Hong Kong stocks fell 0,46 percent, Shanghai dipped 1,81 percent and Seoul lost 0,31 percent, while Sydney closed flat and Tokyo rose 0,18 percent. And despite the budget drama, Wall Street opened on the positive side with the Dow Jones Industrial Average up 0,38 percent and the Nasdaq gaining 0,55 percent.
Any US budget deal though would have to make it through the Republican-led House of Representatives, where conservative Tea Party lawmakers have thwarted previous compromise efforts in a bid to undermine Democratic President Barack Obama.
If Congress does not raise the US$16,7 trillion debt ceiling in time, the US Treasury would begin to run out of money to meet all US obligations and slip towards a historic default.
Economists have warned that such an outcome would have devastating effects on the global economy and on world financial markets.
Fitch warned it would downgrade the US debt rating from its highest level, citing the possibility the Treasury could default on its obligations. — AFP.
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