San Francisco Frontiers - Stocks climb on debt deal hopes

Wall Street pushed higher, with the Dow rising 0.8 percent, despite data showing US inflation rising in April, increasing the chances of another interest rate hike in June.

European stocks closed with solid gains and most Asian markets finishing the day higher.

"Today’s more positive mood appears to be being driven by some optimism that we might see the framework of a debt ceiling deal starting to unfold, with more details expected to emerge over the weekend, as we zero in on next week’s 1st June deadline," said CMC Markets analyst Michael Hewson.

According to unconfirmed US media reports, the debt limit would be suspended for two years, while limits would be placed on social spending.

Markets have taken a hit in recent days on worries about the slow pace of negotiations in Washington, even after President Joe Biden and House Speaker Kevin McCarthy expressed optimism earlier in the week.

On Thursday, Biden 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".

The speaker also expressed his determination to get an agreement to raise the borrowing limit by June 1, when the Treasury has warned the government is expected to run out of cash to service its debts.

Pressure for a deal was ramped up after Fitch placed the country's AAA-ranked credit on "rating watch negative" owing to the standoff.

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.

He said that following the release of the data that futures market is now pricing in the Fed hiking interest rates by 0.25 percentage points next month.

Earlier this month the Fed signalled 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 1530 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 4,337.50 (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: DOWN at $1.0705 from $1.0725 on Thursday

Pound/dollar: UP at $1.2329 from $1.2321

Dollar/yen: UP at 140.61 yen from 140.06 yen

Euro/pound: DOWN at 86.83 pence from 87.04 pence

West Texas Intermediate: UP 1.3 percent at $72.77 per barrel

Brent North Sea crude: UP 1.1 percent at $77.06 per barrel

burs-rl/giv

A.Smith--SFF