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European stocks rebound after U.S. debt deal

STORY: Investors were cheered by developments in U.S. politics Thursday (June 1).

European stocks rose after a bill was passed through the House of Representatives to suspend the $31.4 trillion debt ceiling, and avoid a catastrophic debt default.

Markets were optimistic the legislation could pass through the Senate before the weekend.

The pan-European STOXX 600 index was up 0.7% in morning trade.

The slight recovery comes a day after it closed at a two-month low.

Markets were also hopeful the Federal Reserve could keep interest rates steady this month.

Some Fed officials pointed towards an interest rate hike 'skip' in June.

That led to markets reversing their expectations for another increase.

Investors also received a positive, if not totally unexpected, update from euro zone inflation data.

It eased more than expected last month as underlying price growth also slowed.

The data gave weight to arguments for cautious further rate hikes.

That as the fastest ever European Central Bank monetary tightening cycle starts to take effect.

Inflation in the 20 nations sharing the euro eased to 6.1% in May from 7% in April.

The reading was only a modest surprise for investors, though, as national data earlier this week implied the drop was coming.