Last Update: May 30, 2023, 01:28 AM IST
London, United Kingdom (UK)
Asian shares mostly advanced, with Tokyo’s Nikkei hitting a new 33-year high. But Chinese shares declined after data showed a decline in profits from China’s industrial firms.
US debt deal expected to provide only short-term respite for markets, as concerns remain about inflation and further rate hikes
European stock indexes declined on Monday and euro zone bond yields fell, but news that the US had reached its debt limit over the weekend kept Wall Street futures positive.
US President Joe Biden and top congressional Republican Kevin McCarthy reached a tentative agreement on Saturday to raise the federal government’s $31.4 trillion debt limit, aimed at preventing the US from defaulting on its debt.
The deal is expected to provide only short-term relief for markets, as concerns about inflation remain and further rate hikes.
Asian shares mostly advanced, with Tokyo’s Nikkei hitting a new 33-year high. But Chinese shares declined after data showed a decline in profits from China’s industrial firms.
At 1346 GMT, the MSCI World Equity Index was up 0.1%. European stock indexes initially opened higher, then faltered, with Europe’s STOXX 600 down 0.2% on the day.
But Wall Street futures S&P 500 e-minis climbed 0.2% and Nasdaq e-minis climbed 0.3%. US and UK markets remained closed due to public holidays.
The US six-month credit default swap narrowed, meaning that the cost of insuring against the risk of a US debt default fell in the short term. But the five-year swap rose, suggesting some caution in the markets about the deal.
The US House Rules Committee said it would meet on Tuesday afternoon to discuss the debt ceiling bill, which needs to pass a divided Congress before June 5.
According to Lombard Odier chief economist Sammy Char, if the debt ceiling deal passes Congress, the market’s focus will turn back to the US Federal Reserve’s rate plan.
“Growth, particularly in the US, remains quite resilient. Inflation is very sticky,” Char said.
“We’re back to the narrative where the Fed has to work harder to bring down inflation and that’s obviously going to generate some form of market concern because as soon as you start raising prices instead of cutting rates, When you do, you stress the valuation.”
Markets are expecting the Fed to hike rates by 25 basis points next month, then keep rates steady for the rest of the year.
The Fed’s favorite inflation gauge, the personal consumption expenditure price index, came in higher than expected on Friday and rose to its highest level in more than two months after two-year US yields data. There was no trading in treasuries on Monday. US Treasury note futures were up about 0.24%, a sign that US Treasury yields will fall when bond trading resumes.
Euro area government bond yields were lower compared to euro area inflation data due on Wednesday and Thursday. The benchmark 10-year German yield was down 10 basis points at 2.43%.
The US dollar index was steady at 104.26, and the euro was down 0.2% at 1.07105. The dollar briefly rose to a six-month high against the yen during Asian trade.
In Turkey, the lira hit a new record low against the dollar after President Tayyip Erdogan won presidential elections on Sunday, extending his increasingly authoritarian rule into a third decade.
Oil prices slipped, with Brent crude futures down 1% and US West Texas Intermediate crude down 0.6%. Gold was little changed, hovering near Friday’s two-month low.
(This story has not been edited by News18 staff and is published from a syndicated news agency feed – reuters,
