Risk-on trading sentiment is gathering pace on Monday after the US announced a debt ceiling deal over the weekend. It also notable that trading volumes are light due a number of bank holiday.
The US is observing Memorial Day and the United Kingdom and parts of Europe are also away for bank holiday leaving ill-liquid market conditions that can cause markets to move overly in one direction.
Stocks in Asia opened higher as the US has averted a major economic crisis by raising its debt ceiling as part of a new two-year budget agreement that echoes the structure of the past three such deals.
The agreement keeps non-defense spending roughly flat for the current fiscal year and 2024 and removes budget caps after 2025. Despite Republican requests, the agreement does not incorporate any alterations to Medicaid.
The inflation Reduction Act funding remains intact for clean energy funds for low-income Americans and pollution clean-up. As the US Supreme Court considers a significant student debt case, the resumption of student loan payments has been put on hold.
The agreement has a few stipulations for lower-income Americans, including the introduction of extra work requirements. There’s uncertainty around funding for the IRS, but House Minority Leader Kevin McCarthy announced there are no new taxes or programs in the deal.
McCarthy hailed it as achieving ‘historic reductions in spending’ over the weekend. Keeps non-defense spending ‘roughly flat for current fiscal year and 2024.
It’s not clear if funding for the IRS has been cut and McCarthy also that no new taxes or programs in the deal and that it has ‘historic reductions is spending’.
