Stocks, dollar rise on U.S. debt-deal progress

NEW YORK Sun Jul 31, 2011 7:13pm EDT

U.S. dollar notes are seen in this picture illustration taken at the Bank of Taiwan in Taipei November 11, 2010. REUTERS/Nicky Loh/Files

U.S. dollar notes are seen in this picture illustration taken at the Bank of Taiwan in Taipei November 11, 2010.

Credit: Reuters/Nicky Loh/Files

NEW YORK (Reuters) - U.S. stock futures jumped and the dollar rebounded in a sign of relief that U.S. lawmakers were moving closer on Sunday to a deal that would allow the country to continue to borrow money and head off a devastating short-term default.

The Swiss franc, the favored safety currency during this crisis, pulled back from record highs against the dollar, and gold slipped from all-time peaks.

Markets were moving in anticipation of good news. The S&P 500 futures bounced 15.5 points, or 1.2 percent, to 1,303.90. Gold, which has reached new heights during the stalemate, lost $13.10 to $1,613.49 an ounce.

"At this point, the markets are perceiving that a deal and a vote will be announced," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.

With two days remaining until the United States exhausts its ability to borrow money, legislators said a deal was becoming more likely, but they had some way to go before reaching agreement.

Senate Democratic Leader Harry Reid had hoped to hold a Senate vote on Sunday night on a deal to raise the U.S. debt ceiling but a senior congressional aide told Reuters a vote was "highly unlikely" until Monday.

U.S. Treasury debt futures fell slightly in electronic trading. The 10-year Treasury futures were down 4/32 to 125 18/32.

Oil futures also rose. U.S. crude rose $1.01 to $96.71 a barrel, while Brent crude gained 76 cents to $117.50.

The S&P 500 fell every day last week, losing 3.9 percent. The CBOE Market Volatility Index .VIX, a gauge of investor fear, jumped as much as 9 percent on Friday to its highest level since mid-March before paring its rise.

Even if U.S. lawmakers agree on a last-minute debt limit deal, many investors believe that would not prevent credit ratings agencies from downgrading the United States' triple-A ratings.

"Even if the debt ceiling is raised, all of the heavy lifting will be in front of us," said Peter Kenny, managing director in institutional sales at Knight Capital Group in Jersey City, New Jersey.

"I think it's an almost foregone conclusion that there is going to be a downgrade at some point."

The dollar rebounded against the Swiss franc to 0.7909. On Friday, the U.S. currency hit an all-time low at 0.7853.

(Additional reporting by Jonathan Stempel and Ellen Freilich; Editing by Dale Hudson, Bernard Orr)

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Comments (1)
edgyinchina wrote:
What? ….. “head off a devastating short-term default.”
How does anyone know it would be ‘short-term’ ? ? ? ?
Exactly How ? ? ?
That’s is what is called a ‘hope and a prayer’….

Jul 31, 2011 7:57pm EDT  --  Report as abuse
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