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FIVE at FIVE AU: ASX lifts on news that deal has been struck on Capitol Hill to lift US debt ceiling

Published 29/05/2023, 03:55 pm
© Reuters.  FIVE at FIVE AU: ASX lifts on news that deal has been struck on Capitol Hill to lift US debt ceiling
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The market kicked things off on a positive note today, with the S&P/ASX200 up 69.00 points or 0.96% to 7,223.80 after a less glorious week during which it set a new 20-day low.

Investors snapped up mega-cap, tech, banking, mining and bitcoin stocks – the latter surging 4.8% to US$28.14. Oil was also up, as was the Aussie dollar, which gained 0.3% to US 65.3 cents in the greenback.

Sectors pointing up

All sectors were in the green except for Consumer Discretionary (-0.23%), with Real Estate leading the charge up 1.92%, followed by Materials (1.62%), Financials (1.31%) and Healthcare (1.00%).

Some of the relief felt by investors undoubtedly came down to the fragile agreement on Capitol Hill over the debt ceiling.

The deal looks set to pass through both houses of Congress this week in time to be signed off by the President ahead of the June 5 deadline. It’s not yet clear how much the parties have agreed to lift the ceiling – watch this space.

eToro market analyst Josh Gilbert read the room thus:

"It looks set to be a more positive week on the local market, with ASX futures pointing towards a 1% gain at the open today after falling by more than 2% last week.

“This follows a strong tailwind from US markets on Friday, with the Nasdaq gaining more than 2% alongside a tentative agreement to raise the US debt ceiling.

“The tentative agreement will take away some uncertainty for investors, and that will improve sentiment, helping to drive equities higher.

“The market’s AI-fueled tech rally of last week should also allow tech, the best-performing sector this year, to continue its strong performance.

“Risk assets are already reacting well, with bitcoin gaining 4% in 24 hours and Nasdaq futures up more than 0.5% from today’s US futures open.

“Investors hoping for a large, sustained rally may be disappointed, however. The Nasdaq rose 3.5% last week to its highest level since August, meaning much of the good news may already be priced in.

“We are already seeing that initial relief, but US PCE on Friday showed inflationary pressures had picked up, leaving markets to price in a 65% chance of another hike from the Federal Reserve for its June meeting.

“This is in stark contrast to the 17% chance of a hike last week, which may spoil the party. US markets are also closed until Tuesday due to the Memorial Day holiday.”

IG analyst Tony Sycamore added: “While the weekend's debt deal has enabled markets to breathe a sigh of relief, the market will likely soon focus on the impact of tighter liquidity, a sovereign debt downgrade, and higher interest rates.”

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