Stocks rise on US debt deal

As top US officials finally came to an agreement on the debt ceiling just days before deadline, stock markets worldwide cheered the development, opening the week on a strong note.

The benchmark Philippine Stock Exchange index (PSEi) closed at 6,593.16 yesterday, up by 62.96 points or 0.96 percent while the broader All Shares index gained by 22.33 points or 0.64 percent to end at 3,510.41.

Total value turnover reached P3.29 billion. Market breadth was positive, 93 to 80, while 43 issues were unchanged.

Unicapital Securities said it was a positive development that a bipartisan budget agreement has been reached, effectively resolving the US debt ceiling issue and essentially averting a US default.

“From here, the US Congress is expected to pass the legislation. With the US debt ceiling having been the dominant driver of the market’s correction over the past week, the news is positive for the equity markets,” it said.

Around Asia, shares likewise rose as the weekend deal by US President Joe Biden and House Speaker Kevin McCarthy to suspend the government’s debt ceiling provided relief for investors.

After weeks of negotiations, congressional Republican McCarthy and Biden agreed on Saturday to avert an economically destabilizing default by suspending the $31.4 trillion debt ceiling until 2025. The deal now has to clear a narrowly divided Congress before the United States runs out of money to pay its debts in early June.

“There may be an initial sliver of relief that may send yields a tad lower along with some US dollar bump-up, alongside equities. But the vagaries of pushing the deal through Congress may hold back (the optimism),” said Vishnu Varathan, head of economics at Mizuho Bank in Singapore.

“We always thought there was going to be a resolution, and now we have got that, so that removes some of the uncertainty for markets. But when we get past that, when the votes get passed and when we come back from Memorial Day, the question becomes what next?” said Tony Sycamore, market analyst at IG.

“Yes, we will get the relief rally in the short-term but then we have to start thinking about the June FOMC meeting, about inflation being stickier than expected, and the money being drained out of the markets.”