Global stocks rallied Monday as the longest-ever U.S. government shutdown appeared to be drawing to an end.
The U.S. senate has approved the first stage of a bipartisan deal which could bring an end to the shutdown. The deal would fund the government until Jan. 30th next year, and would potentially reverse some of the permanent layoffs of government employees that occurred during the 35-day impasse.
Strategists said a potential end to the shutdown would offer a boost to investors after a week in which AI and tech stock jitters sent global equities into retreat.
Speaking with CNBC’s “Europe Early Edition” on Monday, Jason Paltrowitz, executive vice president at OTC Markets, said a resolution would be positive, not just in the U.S. but for global markets more broadly.
“I think all news is good news,” said Paltrowitz. “I think the market needs to see we’re moving past this. I think investors want some surety both for the economy and for their own investment,” he added.
U.S. stock futures were in positive territory ahead of Monday’s opening bell, while European stocks rose on Monday, with the Stoxx 600 gaining 1.4%, and the U.K.’s FTSE 100, Germany’s DAX and France’s CAC 40 all in positive territory.
Edmond de Rothschild Asset management said in a flash commentary that the lingering possibility of negative economic consequences had pushed both sides in Congress to resume talks with a view to compromise.
The airline sector has been a key flashpoint throughout the deadlock. A growing shortage of air traffic controllers as a result of missed paychecks has led to a reduction in the number of flights in recent days.
Fears that thousands flights would be during the Thanksgiving holiday, impacting travel and leisure stocks, now appear to have been allayed. Shares of U.S. airline stocks climbed in pre-market trade on Monday.
Consumer sentiment has also been under scrutiny during the deadlock, as investors have grappled with a data blackout amid a growing unease over the health of the U.S. economy. Investment strategists noted how the unlocking of data reports would ultimately provide greater clarity for markets.
Jonathan Pingle, chief U.S. economist at UBS Investment Bank, said the release of data would help reduce uncertainty for the Federal Open Market Committee (FOMC). He said there would be a raft of data released from August, which is expected to be positive, but may subsequently give way to data that would look “quite soft” by comparison.
“The Fed’s been stumbling around in this fog and I think markets would like some clarity one way or another,” Pingle told CNBC’s “Squawk Box Europe” on Monday.
Pingle said the shutdown is a “huge inconvenience” and a “drag on growth.” “There’s a certain amount of cheerleading growing on,” Pingle said of the news of a potential deal on Capitol Hill. “Businesses are going to be happy having a functioning government and getting past reports.”
Nick Nelson, global equity strategist at Absolute Strategy Research, said the deal was “good news” for markets. Speaking to CNBC’s “Squawk Box Europe,” he pointed to weaker consumer confidence data last week, noting how the longer the shutdown went on, with people not getting paid, that could ultimately dent consumption.
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