OPTIMISM over talks to avert a catastrophic US debt default boosted global stocks yesterday, with bullish sentiment about artificial intelligence lifting the Nasdaq.

Wall Street stocks had jumped on Wednesday as investors were reassured that a deal would be done to avoid the US government defaulting on its massive debt that would likely trigger a cataclysm on markets.

That sent Asian markets higher as trading got under way yesterday, with European stocks following in their wake.

While Wall Street opened mixed yesterday, the three major indices later moved into the green following fresh encouraging comments by US political leaders. 

“Confidence is growing that the melodrama playing out in Washington DC is merely a piece of political theatre, and that a deal will happen eventually, as it has on so many previous occasions,” said CMC Markets analyst Michael Hewson.

Major US indices were led by the Nasdaq, which jumped 1.5% in part due to enthusiasm about the earnings potential of artificial intelligence technology.

“Everybody’s really excited about the potential for artificial intelligence and what that could mean for productivity,” Tom Cahill from Ventura Wealth Management told AFP on the day ChatGPT announced an app-based version of its popular AI assistant.

Walmart posted better-than-expected first quarter results and raised its annual profit forecast, providing some reassurance about consumer spending despite high inflation hitting households.

Shares of the huge retailer, a Dow component, rose 1.3%.

But another US regional economic survey pointed to contraction and existing home sales fell for a second month running as higher mortgage rates make it more expensive to borrow.

Meanwhile, first-time unemployment claims fell last week to 242,000.

‘Keep the market guessing’

The strong labour market has been one reason the US Federal Reserve has ploughed on with its interest rate hikes, with worries it may tighten monetary policy too much and push the economy into recession.

Another member of the US Federal Reserve’s rate-setting committee indicated her support yesterday for an additional rate hike next month, underscoring divisions at the Fed over how aggressively to target inflation. 

Dallas Fed president Lorie Logan joins three other members of the Federal Open Markets Committee (FOMC) – which currently has just 11 voting members – in indicating that the Fed may need to raise rates again on June 13-14.

The dollar rose further yesterday, having already made solid gains the previous day as investors sought shelter in the haven unit.

G7 leaders arrived in Hiroshima, Japan, for a key summit – but the debt drama has already forced US President Joe Biden to cancel planned stops in Papua New Guinea and Australia, sparking hopes of a breakthrough.

Key figures around 2040 GMT

New York - Dow: UP 0.3% at 33,535.91 (close)

New York - S&P 500: UP 0.9% at 4,198.05 (close)

New York - Nasdaq: UP 1.5% at 12,688.84 (close)

London - FTSE 100: UP 0.3% at 7,742.30 (close)

Frankfurt - DAX: UP 1.3% at 16,163.36 (close)

Paris - CAC 40: UP 0.6% at 7,446.89 (close)

EURO STOXX 50: UP 1.2% at 4,367.45 (close)

Tokyo - Nikkei 225: UP 1.6% at 30,573.93 (close) 

Hong Kong - Hang Seng Index: UP 0.9% at 19,727.25 (close)

Shanghai - Composite: UP 0.4% at 3,297.32 (close)

Euro/dollar: DOWN at US$1.0776 from US$1.0840 on Wednesday

Pound/dollar: DOWN at US$1.2408 from US$1.2487 – AFP, May 19, 2023.