US stocks reached a nine-month high on Thursday as lawmakers in Washington boosted traders’ hopes that the debt ceiling will pass through the Senate by the end of the week, and fresh economic data curbed concerns about a recession.
Wall Street’s benchmark S&P 500 added 1 per cent. The tech-heavy Nasdaq Composite gained 1.3 per cent, recouping losses from the previous session. Both indices closed at their highest levels since August 2022.
The House of Representatives late on Wednesday passed a bill to raise the debt ceiling — a crucial step to avert a historic default. It will be sent to the Senate, which is the final stage before it can be signed into law.
Chuck Schumer, the Democratic leader of the Senate, said the upper chamber of Congress would stay in session until the debt ceiling bill was approved, which would raise the US borrowing limit and set caps on spending for the next two years.
“We still have to get through the Senate, but I’m more inclined to think that’s a rubber stamp at this point,” said Stephen Innes, managing partner at SPI Asset Management. “The market here is positioned very much in favour of this going through.”
Meanwhile, data from the US labour department showed the number of new applications for unemployment aid edged up to 232,000, but remained at historically low levels despite the cooling economy. The data comes ahead of Friday’s official jobs report.
“The data’s come through as much more resilient than the market expected,” said Rob Haworth, senior investment strategist at US Bank Wealth Management. “The labour market is staying strong, and consumer spending is slowing, but it’s still stronger than people expected if we were headed straight into recession.”
Two top Fed officials on Wednesday signalled their support for the central bank to abstain from raising its benchmark policy rate at its June meeting.
Following dovish comments from Fed governor Philip Jefferson and Philadelphia Fed president Patrick Harker, the implied likelihood of a rate rise at the next meeting fell back to about 30 per cent.
At the same time, the shares of discount retailer Dollar General fell 19.5 per cent after it cut its sales forecast as persistent inflation weighs on lower-income consumers.
In Europe, the region-wide Stoxx 600 closed 0.8 per cent higher, while Germany’s Dax gained 1.2 per cent and France’s CAC 40 rose 0.6 per cent.
Traders grew more confident after official data showed eurozone-wide inflation decelerated more than expected, falling to 6.1 per cent in May, its lowest level since Russia’s full-scale invasion of Ukraine. A consensus of economists’ forecasts gathered by Reuters expected inflation to fall to 6.3 per cent.
Core inflation, which strips out energy and food prices, fell from 5.6 per cent in April to 5.3 per cent in May.
The numbers gave traders more confidence that the European Central Bank would agree only a quarter-point rise when it meets on June 15, and could represent the peak of interest rates in the eurozone.
“A September rate hike has become more and more unlikely, and even a July hike is starting to be put into question,” said Kamil Kovar, senior economist at Moody’s Analytics.
In Asia, China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks advanced 0.2 per cent on the back of an unexpected rebound in a critical gauge of Chinese factory activity.
The Caixin/S&P Global manufacturing purchasing managers’ index rose to 50.9 in May, in contrast with the official manufacturing PMI released earlier this week, which declined to 48.8. A reading above 50 indicates expansion compared with the previous month.
However, gains evaporated in Hong Kong and the benchmark Hang Seng stock index finished 0.1 per cent lower, having fallen nearly 20 per cent since its January peak, near lowest levels since November 2022.