Asian markets soar on US debt deal

by Noor Bangash Wed Sep 14, 2011 10:44 am

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HONG KONG: Asian stock markets surged on Monday morning after US President Barack Obama said lawmakers had reached a last-minute deal that would raise the country's debt ceiling and avoid a catastrophic default.

Tokyo jumped 1.84 percent by the break, Hong Kong rose 1.42 percent and Sydney added 1.93 percent, while Seoul gained 1.77 percent and Taipei climbed 0.42 percent. Shanghai was flat.

"I want to announce that the leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default, a default that would have had a devastating effect on our economy," Obama said late Sunday in Washington.

The deal will raise the country's $14.3 trillion debt ceiling by about $2.4 trillion in two steps, while calling for roughly the same amount in spending cuts over 10 years.

However, the bill must still be passed by both houses of Congress and Obama urged lawmakers "to do the right thing and support this deal".

Traders worldwide have been on edge for several weeks as the White House and Democrats squabbled with the Republicans over how to make enough budget cuts to allow a hike in the debt limit.

A default by the United States, the world's richest country, would send shudders through the global economy that could lead to another financial crisis.

The news also lifted the dollar after a steady sell-off last week as Democrats and Republicans struggled to come to an agreement.

The greenback was at 77.83 yen in Tokyo at 0200 GMT after briefly rising above the 78 yen level, up from 76.73 yen in New York late Friday.

The euro fetched $1.4387 against $1.4395. The European single unit rose to 111.97 yen from 110.41 yen.

Oil also rallied on the announcement. New York's main contract, light sweet crude for delivery in September, surged $1.53 to $97.23 per barrel.

Brent North Sea crude gained $1.25 to $117.99.

Gold opened in Hong Kong at $1,612.00-$1,613.00 an ounce, unchanged from Friday's finish. (AFP)