Credit markets calmed following the approval of a short debt-limit increase, pushing the lapse of US borrowing authority from 17 October to 22 November.
Financials rallied on the news – on the Dow Jones the sector gained 2.67 per cent and the FTSE 2.3 per cent.
Extending the borrowing authority doesn’t solve the current problems facing the US government over the debt limit, but offers markets a reprieve in the interim.
Domestic financials have lost 1.56 per cent over the past 5 days of trade and are due for a bounce on the news of the debt limit extension.
China’s steel index, which acts as a benchmark, for iron ore rose again for the third day, averaging $135 a tonne year-to-date.
Concern over China’s future growth has turned up various forecasts for the price of iron ore in the past week. However, the market has already considered this and largely priced it in.
Commodity demand so far this year has comfortably exceeded expectations, encouraging investors to return to commodity-based stocks.
While the latest string of data suggests miners are primed for a bounce, gains could be muted if investors place a greater emphasis on a higher domestic currency.