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Global markets rallied on Monday after the US Senate took the first step to end the longest government shutdown in history on Sunday night in Washington.
The Stoxx Europe 600 index rose 1.2 per cent in early trading, and Germany’s Dax was up 1.5 per cent. US futures tracking the S&P 500 and Nasdaq 100 indices rose 0.9 per cent and 1.5 per cent, respectively.
Government bonds slipped as investors moved back into riskier assets. Yields on 10-year US Treasuries, which move inversely to the price, rose 0.05 percentage points to 4.14 per cent.
“It’s a relief rally irrespective of geography,” said Geoffrey Yu, a senior strategist at BNY.
Stock markets across Asia also rose, with South Korea’s Kospi up 3 per cent and Hong Kong’s Hang Seng index gaining 1.6 per cent. Japan’s tech-heavy Nikkei 225 index closed 1.3 per cent higher and the Topix rose 0.6 per cent.
Eight Democratic lawmakers crossed party lines to endorse a compromise plan to reopen the US federal government and keep it funded until the end of January.
The plan would also reverse the lay-offs initiated by the White House during the shutdown, which began on October 1, and guarantee that furloughed workers receive back pay, while including a concession by Democrats on healthcare tax credits that have been a key sticking point in the funding stand-off.
Monday’s gains come after global stock markets wobbled last week, with tech stocks leading the declines, as concerns about the sky-high valuations of Silicon Valley’s tech giants collided with weaker than expected US economic data.
“The non-tech part of the market should benefit more from the end of the shutdown,” said Tai Hui, chief Asia market strategist at JPMorgan Asset Management. Although spending on artificial intelligence has helped support US growth this year, “the rest of the economy needs the government to get back to work”, he said.
Richard Yetsenga, chief economist and head of research at ANZ, said the shutdown had contributed to falling bond yields and gold prices.
“If the shutdown’s over I would expect a reversion of some of those shifts,” he said, noting that concerns over the sustainability of US fiscal spending were likely to return once the government reopened fully.
Although US tech stocks suffered their worst sell-off last week since April’s “liberation day” tariffs, the market is still trading around record highs.
“The government is shut down, the market goes up. The government is open, the market goes up. This is an irrelevant detail for bubble addicts,” said Albert Saporta, group chief executive of GAM Holding.
Gold prices rose 1.9 per cent on Monday to $4,075 a troy ounce and bitcoin rallied 1.4 per cent to about $106,000 a token.
The Senate will still need to debate and pass the deal before sending it to the Republican-controlled House of Representatives.
The US government reopening would also bring clarity on the state of the country’s economy after the shutdown halted crucial data releases on the labour market, which has shown signs of cooling.
“Let’s just hope there’s no sting in the tail when data comes through,” said BNY’s Yu.
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