US stocks have surged on progress towards a potential deal in Washington to prevent a debt default, recovering a hefty portion of their losses since the partial government shutdown began.
The Dow Jones Industrial Average on Thursday soared 323.09 (2.18 per cent) to 15,126.07, just below its level on the eve of the October 1 shutdown.
The broad-based S&P 500 jumped 36.16 (2.18 per cent) to 1,692.56, while the tech-rich Nasdaq Composite Index added 82.97 (2.26 per cent) at 3,760.75.
A breakthrough in the political logjam seemed at hand when House of Representatives Speaker John Boehner offered to extend the US borrowing authority for six weeks. But his proposal would not end the shutdown.
President Barack Obama met with Republican leaders at the White House.
The developments suggest “both sides appreciate the gravity of a default”, said Jack Ablin, chief investment officer at BMO Private Bank.
“It’s not worth sending our country into a tailspin over ideological differences. I think investors are breathing a sigh of relief.”
The Australian dollar rallied half a US cent overnight, reversing earlier losses after investors re-assessed local jobs data and the US political situation.
Early Friday, the local unit was trading at 94.63 US cents, up from 94.08 cents on Thursday.
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The Australian dollar dipped below 94 US cents on Thursday after closer examination of better-than-expected jobs data had investors rethinking their initial positive reaction to the figures, said ANZ senior manager FX in Auckland Sam Tuck.
“Adding to that as well was that there was some general excitement that the Republicans were starting to cave, which would lead to US dollar strength,” he said.
“But, then, the markets decided late in the evening that that was the wrong reaction.
“You should see some Aussie dollar strength, just due to the fact that we’ve got a new dovish US Federal Reserve nomination with Janet Yellen, US jobless claims last night were weaker than expected and there will have been some dent to confidence in the US from the government shutdown so far.”
