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Global equities rallied on Monday amid growing optimism that the US government shutdown—which had dragged on for a record 40 days—was nearing an end.
Reports indicated that a bipartisan deal had been reached in the Senate to fund federal operations through January, a prospect that eased concerns about the world’s largest economy and helped temper existing worries about extended valuations in the technology sector.
The breakthrough comes after weeks of intense wrangling over contentious issues, including health care subsidies and the firing of federal employees.
The shutdown’s economic impact has been significant, with the Congressional Budget Office estimating it could shave 1.5 percentage points off quarterly GDP growth.
A decline in consumer sentiment was also noted.
The agreement needs up to 30 hours of debate in the Senate before requiring approval from the Republican-controlled House and then President Donald Trump’s signature.
The resumption of government operations is critical for financial markets because it will allow for the release of crucial, delayed Tier 1 economic data, including key labour market figures.
This data is essential for the Federal Reserve as it evaluates whether to proceed with another interest rate cut in December.
Although private data suggested US layoffs hit a 22-year high in October, key Fed members have emphasised that their primary concern remains stubbornly high inflation, indicating a high bar for further monetary easing.
