The dollar is back above 140 yen for the first time since November as the Japanese currency has come under pressure on expectations the Bank of Japan will keep monetary policy ultra loose while the Fed presses on with rate hikes / © AFP/File
Global stock markets advanced Friday on hopes of progress in negotiations to avert a calamitous US debt default and a continued rally in tech stocks over enthusiasm for firms involved in artificial intelligence.
On Wall Street, the broad-based S&P 500 rose 1.3 percent to 4,205.45, while the Dow Jones Industrial Average posted a more modest 1.0 percent gain to finish the week at 33,093.34.
"The market is rising on the hope that they probably will be announcing very soon that we avert the default," Peter Cardillo from Spartan Capital Securities told AFP, referring to the negotiations between the White House and Republicans in Congress.
The Nasdaq soared to finish the day up 2.2 percent at 12,975.69, fueled by a continued rally in stocks like Nvidia which stand to benefit from the widespread adoption of AI tools.
European stocks closed with solid gains and most Asian markets finishing the day higher.
According to unconfirmed US media reports, the debt limit would be suspended for two years, while limits would be placed on social spending.
On Thursday, the US president reiterated his pledge that "there will be no default" despite the wrangling, adding that talks with McCarthy, who leads the Republican negotiators, had been "productive".
Pressure for a deal was ramped up after Fitch placed the country's AAA-ranked credit on "rating watch negative" owing to the standoff.
Shortly after the US stock markets had closed Friday, US Treasury Secretary Janet Yellen published a letter sent to Congressional leaders warning of a possible US debt default on June 5 if they fail to raise the debt limit, four days later than a previous estimate of June 1.
In another source of concern, data showed the US Federal Reserve's preferred measure of inflation -- the personal consumption expenditures (PCE) index -- rose 4.4 percent year-on-year in April, up from 4.2 percent a month earlier. The core index, excluding volatile food and energy prices, also rose, as did personal income and spending.
The data "will give the Fed some pause about pausing its rate hikes in June," said Briefing.com analyst Patrick O'Hare.
Earlier this month, the Fed signaled it will take a "data dependent" approach as to whether it needs to hike interest rates further to squash inflation, with markets hoping for a pause in interest rates.
Asian markets mostly rose on Friday, with Tokyo leading the way thanks to a weaker yen and softer inflation that had traders betting the Bank of Japan would not tighten monetary policy any time soon.
The dollar on Thursday broke past 140 yen for the first time since November, with strong US data fanning expectations the Federal Reserve will hike interest rates again next month.
Crude prices recovered after falling sharply on Thursday on comments that the OPEC oil cartel may not cut production next month to support prices.
But CMC Markets' Hewson said, "The risk of further sharp falls is being mitigated somewhat by the fact that the markets know the US government is a buyer below $70 as it looks to refill the (Strategic Petroleum Reserve) by the end of the summer."
- Key figures around 2050 GMT -
New York - Dow: UP 0.8 percent at 33,028.90 points
London - FTSE 100: UP 0.7 percent at 7,627.20 (close)
Paris - CAC 40: UP 1.2 at 7,319.18 (close)
Frankfurt - DAX: UP 1.2 percent at 15,983.97 (close)
EURO STOXX 50: UP 1.6 at 4,338.26 (close)
Tokyo - Nikkei 225: UP 0.4 percent at 30,916.31 (close)
Hong Kong - Hang Seng Index: Closed for a holiday
Shanghai - Composite: UP 0.4 percent at 3,212.50 (close)
Euro/dollar: UNCHANGED at $1.0725
Pound/dollar: UP at $1.2350 from $1.2321 on Thursday
Dollar/yen: UP at 140.59 yen from 140.06 yen
Euro/pound: DOWN at 86.84 pence from 87.04 pence
West Texas Intermediate: UP 1.2 percent at $72.67 per barrel
Brent North Sea crude: UP 0.9 percent at $76.95 per barrel