Global Stocks Rally On US Debt Ceiling Agreement

Global investors cautiously welcomed news of an agreement that could stave off a catastrophic US debt default. Global stocks and oil prices were higher on Monday. Germany's DAX (DAX) rose by 0.3% in early trading, while France's CAC 40 (CAC40) saw a slight increase of 0.2%. 

In Asia, Japan's Nikkei 225 closed at a 33-year high due to optimism surrounding the debt ceiling deal and a weaker yen, benefiting exporters. The Nikkei 225 has experienced a remarkable 20% rally this year.

Due to a holiday, US and UK markets will remain closed on Monday. However, Dow futures and S&P 500 futures rose by approximately 0.3%, while Nasdaq futures climbed by 0.5%. On Friday, the US markets made gains following reports of an imminent deal between President Joe Biden and US House of Representatives Speaker Kevin McCarthy. This deal would enable the US government to continue meeting its financial obligations.

On Saturday, they reached an agreement in principle to raise the debt ceiling for two years and implement spending caps. This agreement takes the US away from the precipice of a historic default, which would have had disastrous consequences for stock and bond markets and severely impacted the US and global economy.

While the US debt agreement has provided some optimism to the markets, significant work remains. The deal must be passed before a revised date of June 5, which Treasury Secretary Janet Yellen identified as the crucial date when the US will no longer be able to meet its financial obligations.