Global markets bounce as US approaches deal to stop a fresh government shutdown

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Reuters/Lucas Jackson

  • Global stock markets were rallying for a second consecutive day early Tuesday as investors took heart from news overnight that a fresh shutdown of the US government might be averted.
  • The fresh shutdown, which was set to begin Saturday, would be averted if a new funding deal is approved.
  • Shares around the world rallied, with Japan’s Nikkei climbing 2.6% during Tuesday trade, and Germany’s DAX rallying 1%.
  • You can follow the latest market movements at Markets Insider.

Global stock markets were rallying for a second consecutive day early Tuesday as investors took heart from news overnight that a fresh shutdown of the US government might be averted.

US lawmakers late Monday reached a tentative deal on border-security funding that, if passed, would avert a fresh shutdown of parts of the government, which is set to begin Saturday. The government was shut down for much of December and January, but a temporary deal to halt the shutdown was implemented in late January.

Reuters reports that the new agreement does not contain the $5.7 billion President Donald Trump wants for a wall on the southern US border.

“Equity markets in Asia followed Wall St’s lead higher following an agreement in principle by US lawmakers to avert a fresh government shutdown, granting President Trump $1.4 billion in funding for border controls, but only for bollard fencing not an actual wall, and well below his desired $5.8 billion,” Mike van Dulken, the head of research at Accendo Markets, wrote in an email.

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Alongside hopes that a fresh shutdown can be avoided, markets are buoyed by continued optimism that trade talks between Washington and Beijing will yield a positive outcome.

Representatives from the US and China began talks in Beijing on Monday, with the aim of making progress toward a trade deal of some form before the 90-day deadline imposed at the G20 summit in Argentina late in 2018.

Talks are expected to be conducted between relatively junior officials before Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer take over on Thursday and Friday.

Optimism around trade and the prospect of an avoided shutdown have contributed to a substantial rally in equities around the world, with Asian and European stocks jumping Tuesday and US equities set to continue the strong start to the week they witnessed Monday. Here’s how things looked about 10 a.m. GMT (5 a.m. EST):

  • Chinese markets continued their strong start to the week, with the Shenzhen Component index the biggest winner, gaining 1.2%. Elsewhere, gains were smaller, with the Shanghai Composite up 0.7% and the China A50 just 0.1% higher.
  • Asia’s biggest winner on Tuesday was Japan’s Nikkei 225, which popped 2.6%, thanks partly to a weaker yen and partly because Japanese markets were closed Monday, so investors missed out on the day’s gains.
  • In Europe, all major share indexes were higher during morning trading, with gains generally between 0.4% and 0.7%. Germany’s DAX was the biggest winner, climbing 1% Tuesday despite fears that Europe’s economic powerhouse entered recession at the end of 2018.
  • Elsewhere in Europe, France’s CAC 40 rallied 0.8%, while the Euro Stoxx 50 broad index was 0.7% higher.
  • Futures pointed to a strong start to trading in the US later Tuesday, with the Dow and the S&P 500 set to open roughly 0.5% higher and the Nasdaq looking at a 0.7% gain.