US deficit report prompts market bounce

Stock markets in the US and UK have risen sharply this afternoon after a US government report revealed a decline in the US budget deficit in coming years as a result of the cuts agreed at the start of August.

The landmark US budget deal and lower interest rates will slice projected budget deficits nearly in half over the next decade, the nonpartisan Congressional Budget Office has reported in a new report.

The CBO calculates that the US will rack up $3.487 trillion in cumulative deficits over ten years, some $3.3 trillion below its previous projection.

Further good news came in the form of US durable goods orders, which showed orders rising four per cent in July, far over forecasts for two per cent, caused by higher orders for transportation equipment.

The good news on national debt and industrial growth has sent US indices sharply higher, with the Dow Jones industrial average moving up one per cent while the S&P 500 index gained more than one per cent.

In the UK the FTSE 100 also saw a noticeable bounce, moving from 5,166 to 5,221 within an hour.

The prices of US Treasuries fell after the report was released, with the benchmark 10-year Treasury note last down 6/32 in price and yielding 2.18 per cent, up from 2.16 per cent on Tuesday.