European stock markets are optimistic about the US debt ceiling negotiations
European stocks rose on Friday at the end of a rally on Wall Street around chipmaker earnings, as investors awaited signs of further progress in talks on the US debt ceiling.
The Stoxx 600 covering the European region increased by 0.3 percent, while the French Cac 50 and the London FTSE 100 both gained 0.2 percent. The German Dax was flat.
Contracts trailing Wall Street’s benchmark S&P 500 and the tech-heavy Nasdaq 100 rose 0.3 percent ahead of the New York open.
Investors were watching developments in Washington, where policymakers signaled their push to raise the U.S. debt ceiling ahead of a June deadline to avoid an unprecedented government default.
“Also in politics, if markets start to sell off because we’re getting uncomfortably close to the deadline, politicians will obviously start to change their behavior,” said Emiel van den Heiligenberg, head of asset allocation at LGIM.
The pressure on government bonds eased slightly. The yield on bond-sensitive two-year bonds decreased by 0.03 percentage points to 4.49 percent. The benchmark 10-year bond yield fell by 0.03 percentage points to 3.78 percent. Bond yields fall as prices rise.
The yield on Treasury bills maturing in one month – close to when the US government may run out of money – stood at 5.7 percent on Friday, down from a peak of 6.01 percent earlier in the week.
The dollar lost 0.3 percent against a basket of six other currencies.
The moves came a day after Nvidia sparked a market rally after it reported higher-than-expected quarterly profit, bolstered by surging demand for chips used in generative artificial intelligence systems.
Shares of Nvidia jumped 24 percent on the day, making the company the first chip maker to be valued at more than $1 billion. The rally spread to other AI-related stocks, sending the tech-heavy Nasdaq Composite up 1.7 percent. The benchmark S&P 500 rose 0.9 percent.
“Stock market performance is very tight. Only tech stocks are performing – except for tech stocks, the S&P is flat,” van den Heiligenberg said.
“It’s not that different from 1995, when people started talking about the potential of the Internet. . . Slowly but gradually, ignoring this becomes a career risk. If you don’t have technology in your equity portfolio, you can actually miss a structural change in the markets,” he added.
Turkey’s lira fell to 20 against the US dollar for the first time, the latest sign of mounting pressure on the country’s economy ahead of Sunday’s runoff election. President Recep Tayyip Erdoğan, who has led Turkey for two decades, is expected to win this weekend’s runoff vote.
Oil prices rose after Opec+ members received mixed messages on future production of the fuel. Brent crude oil, the international benchmark, rose 0.35 percent to $76.53 a barrel, while the US equivalent of West Texas Intermediate rose 0.6 percent to $72.26.
Russian President Vladimir Putin and the country’s deputy prime minister said further production cuts are unlikely at next month’s OPEC+ meeting.
Asian stock markets were restrained, the Hang Seng index in Hong Kong fell 1.9 percent, while the Chinese CSI did not change.