Debt ceiling agreement passed by Senate
KOSPI 2600 recovery, Hong Kong soared by 4%
Expectations of a Fed rate freeze also play a role
The US federal government’s debt ceiling agreement passed both the House and the Senate on the 1st (local time). Concerns that the U.S. may fall into an unprecedented “debt default” (default) have been resolved, and expectations that the U.S. central bank, the Federal Reserve System (Fed), will freeze its benchmark interest rate at the Federal Open Market Committee (FOMC) this month. This has been a boon to the world stock market. On the 2nd, Korea’s KOSPI recovered to 2,600 units in a year, and Japan’s Nikkei index hit its highest level in 33 years.
According to this bill, the ruling Democratic Party can defer the application of the federal government’s debt ceiling, which is currently $31.4 trillion (about 4 trillion 1700 trillion won), until January 2025, as it has argued so far. This means that over the next year and a half, money that exceeds the debt limit can be spent without Congressional approval. In addition, opposition Republicans’ calls for a freeze on non-defense spending for fiscal year 2024 (October 2023-September 2024), a 3% increase in military spending, and tougher work requirements for the low-income food assistance system were also accepted. .
Right after the agreement passed that day, favorable comments poured in, saying, “The Democratic Party and the Republican Party have worked together in a rare way to pass the bill in a highly polarized U.S. political world.” President Joe Biden also made a statement immediately after passing the Senate and welcomed “the bipartisan agreement as a great victory for the US economy and Americans.” After signing the bill, he decided to give a speech to the nation at 7:00 p.m. If he signs it, the bill will go into effect immediately.
On the 2nd, the KOSPI finished at 2,601.36, up 1.25% from the previous day. It stepped over the 2,600 line again in a year after June 9 last year (2,625.44). The won-dollar exchange rate also closed at 1305.7 won, down 15.9 won, increasing the value of the won.
Japan’s Nikkei index rose 1.21 percent to close at 31,524.22, the highest since July 1990. Hong Kong’s Hang Seng Index (4.02%), Taiwan’s Jacquan Index (1.18%), and China’s Shanghai Composite Index (0.79%) all rose.
Stock markets in major European countries also rose on the day. Kim Seok-hwan, a researcher at Mirae Asset Securities, explained, “The stock market of each country showed a strong performance as the risk appetite recovered due to the conclusion of the US debt ceiling agreement and expectations of a US interest rate freeze in June.”
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.