Global Markets Waver as US Debt Ceiling Talks Progress Slowly
Key Highlights :
Global stock markets wavered Wednesday as investors fretted over the slow progress of talks seeking to raise the US debt ceiling. All eyes remain on Washington, where lawmakers remain deadlocked in negotiations to lift the country’s borrowing limit to pay its debts and avert a market-rattling default.
The haven dollar climbed and the euro slid to $1.0821, the lowest level since early April, in a broad dollar rally as the greenback benefitted from its status as a safe bet in times of economic turmoil. Stocks lacked direction as US struggles to reach debt deal, with Asian and European equities handed a tepid lead from Wall Street, where disappointing retail sales data and weak Home Depot earnings highlighted soft consumer demand.
Analysts said the readings were unlikely to give the Federal Reserve room to pause its interest-rate hiking campaign yet. “The greenback is finding support as lawmakers in Washington seem unable to reach an agreement over the lifting of the debt ceiling,” said ActivTrades analyst Ricardo Evangelista. “The standoff between Democrats and Republicans is likely to continue and, if unresolved, could have serious consequences for the US and global economy.”
US President Joe Biden met Republican House Speaker Kevin McCarthy and other congressional leaders at the White House on Tuesday after saying staff-level talks had produced no shift. McCarthy told reporters there was still “a lot of work to do” before the country runs out of cash, which the Treasury has warned will happen around June 1. There was a sliver of light, as he said he ultimately expected a deal.
In a bid to get an agreement over the line, the president scrapped subsequent stops in Papua New Guinea and Australia, instead planning to return to Washington on Sunday. Asia indices enjoyed mixed fortunes but star performer Tokyo jumped after figures showed Japan’s economy grew more than expected in January-March thanks to a surge in tourism after pandemic border restrictions were lifted.
The figures helped push the Nikkei 225 to a 20-month high and it has now piled on more than 15 percent since the turn of the year. Analysts said the strong market performance has been helped by corporate reforms and Bank of Japan’s ultra-loose monetary policies.
Key figures around 1050 GMT included London - FTSE 100: FLAT at 7,747.60 points, Frankfurt - DAX: UP 0.3 percent at 15,940.51, Paris - CAC 40: DOWN 0.2 percent at 7,394.73, EURO STOXX 50: FLAT at 4,316.49, Tokyo - Nikkei 225: UP 0.8 percent at 30,093.59 (close), Hong Kong - Hang Seng Index: DOWN 2.1 percent at 19,560.57 (close), Shanghai - Composite: DOWN 0.2 percent at 3,284.23 (close), New York - Dow: DOWN 1.0 percent at 33,012.14 (close), Euro/dollar: DOWN at $1.0832 from $1.0862 on Tuesday, Pound/dollar: DOWN at $1.2446 from $1.2488, Dollar/yen: UP at 136.96 yen from 136.39 yen, Euro/pound: UP at 87.01 pence from 86.98 pence, Brent North Sea crude: UP 0.5 percent at $75.29 per barrel, West Texas Intermediate: UP 0.5 percent at $71.23 per barrel.
The lack of progress in the US debt ceiling talks is causing global markets to waver as investors become increasingly concerned about the potential for a market-rattling default. The dollar has been the beneficiary of the uncertainty, with the euro sliding to its lowest level since early April. Asian and European equities have been handed a tepid lead from Wall Street, with disappointing retail sales data and weak Home Depot earnings highlighting soft consumer demand.
The Tokyo stock market was the star performer of the day, with the Nikkei 225 jumping to a 20-month high after Japan’s economy grew more than expected in January-March thanks to a surge in tourism after pandemic border restrictions were lifted. Analysts said the strong market performance has been helped by corporate reforms and Bank of Japan’s ultra-loose monetary policies.
US President Joe Biden is optimistic that there is a path to a responsible, bipartisan budget agreement if both sides negotiate in good faith. However, McCarthy has warned that there is still “a lot of work to do” before the country runs out of cash, which the Treasury has warned will happen around June 1. Global markets will be closely watching the progress of the talks in the coming days, as a market-rattling default could have serious consequences for the US and global economy.
