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Wall Street and FTSE higher amid hope for debt ceiling deal

A look at how the major markets are performing on Friday

 FTSE  U.S. President Joe Biden departs after delivering remarks on
FTSE and US stocks higher on hopes of debt deal breakthrough. Photo: Kevin Lamarque/Reuters (Kevin Lamarque / reuters)

The FTSE 100 and European stocks were higher on Friday amid increasing hopes of an imminent deal on the US debt ceiling.

The FTSE 100 (^FTSE) rose 0.93% to 7,640 points during afternoon trading, while the CAC 40 (^FCHI) in Paris climbed 1.29% to 7,322 points. In Germany, the DAX (^GDAXI) gained 1.17% to 15,978.

FTSE

The blue-chip FTSE 100 rose but was set to record its worst week in over a month as an unexpected rise in UK core inflation and the US debt ceiling uncertainties strained markets.

Asos's (ASC.L) shares surged at the open only to plunge 1.44% after the online fashion retailer announced plans to boost its balance sheet through a new long-term £275m ($339.9m) financing facility alongside a £75m placing as it continues to restructure the business.

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Rio Tinto (RIO.L) jumped 3.52% after brokerage Morgan Stanley (MS) turned bullish on the miner.

AstraZeneca (AZN.L) added 1.37% after the drugmaker said a combination of its cancer drugs when added to chemotherapy showed positive results in a late-stage trial in patients with advanced or recurrent endometrial cancer.

Also driving sentiment, UK retail sales volumes rose 0.5% in April after a 1.2% fall in March. The sales volumes over the three months to April grew by the most since mid-2021, as per an official report.

Read more: What is a recession and is the UK heading into one?

However, there were some jitters around interest rates, with Mohamed A El-Erian, president of Queens’ College, Cambridge, and chief economic adviser at Allianz saying that the Bank of England has no choice but to keep hiking interest rates to fight inflation.

El-Erian told BBC Radio 4’s Today programme: "I don’t think the Bank of England has any choice but to increase interest rates further.

"It could well take interest rates from 4.5% [today] all the way to 5.5%. That’s what the market is anticipating.

"And that’s understandable because it has one target, to reduce inflation to 2%, and we’re well above."

US and Asia

US stocks were slightly higher on Friday as investors waited for developments in the debt-ceiling deliberations in Washington and digested the latest corporate earnings.

The Dow Jones (^DJI) gained 1.07% to 32,115 points. The S&P 500 (^GSPC) rose 1.22% to 4,201 points and the tech-heavy NASDAQ (^IXIC) climbed 0.82% to 12,801.

Both the Dow Jones and S&P 500 entered Friday on track to close the week lower after the debt-ceiling discussions slightly weighed on markets throughout the week. On Friday morning, Reuters reported that president Joe Biden and House speaker Kevin McCarthy are "closing in on a deal" to extend the government's debt ceiling for two years.

"Negotiators appear to be closing in on an agreement," Goldman Sachs economic research team led by Jan Hatzius wrote in a note to clients on Thursday night.

In Asia, markets were mixed on Friday as a deadline loomed for Congress to reach a deal on the US government debt or face a potentially calamitous default.

Read more: Trending tickers: Asos | Rio Tinto | Marvell | Costco

Tokyo’s Nikkei 225 (^N225) gained 0.37% to 30,916 points after surpassing the 31,000 mark earlier in the day, while the Shanghai Composite (000001.SS) rose 0.35% to 3,212 points. Hong Kong's Hang Seng (^HSI) was closed for a holiday.

Tokyo’s core inflation, which excludes fresh food and fuel costs, rose by 3.9%, its fastest pace since 1982. The consumer price index for Japan’s capital, which is seen as a gauge for the nationwide reading, rose at a slower pace of 3.2% in May from April’s figure of 3.5%.

Pound

The pound (GBPUSD=X) bounced back against the dollar, with sterling trading at $1.2348.

Sterling (GBPEUR=X) also rose against the euro and was trading at €1.1498.

Oil markets

Meanwhile, Brent crude (BZ=F) rose and was trading at around $76 per barrel as investors weighed in on conflicting messages on supply from Russia and Saudi Arabia ahead of the next OPEC+ policy meeting.

Worries of weaker-than-expected demand growth globally weighed on investor outlook.

"There are multiple signs that global demand growth is unlikely to come close to earlier year forecasts. China, which constitutes about half of most estimates, looks increasingly unlikely to reach anyone's estimates for 2023," Citigroup said.

Watch: AI market: What investors should watch for amid Nvidia surge

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