Global markets were mixed on Tuesday, with US stock futures trading in a tight range ahead of debt-ceiling talks. Japan’s Topix closed at the highest since 1990 and the pound weakened.
A standoff over whether to raise the federal debt limit is sidelining many investors as they wait for a breakthrough in Washington. In Europe, Vodafone Group Plc shares sank on weak earnings and Telecom Italia SpA fell after a report that Italy’s state lender will drop its offer for the carrier’s landline network. More broadly the region’s Stoxx Europe 600 index was little changed.
“We are all looking to Congress and the White House to see how the US debt ceiling discussions are moving ahead,” said Joachim Klement, head of strategy, accounting and sustainability at Liberum Capital. “Now that we have sufficient clarity on central bank policy and are close to the rate hike cycle peak, investors are looking for clarity on the political front before the coming earnings season.”
Debt-ceiling talks are scheduled Tuesday between President Joe Biden and House Speaker Kevin McCarthy. Treasury Secretary Janet Yellen warned that the US is already paying a price for its failure to raise the federal debt limit and reiterated her department may run out of cash as soon as June 1.
Still, most investors say they expect politicians to reach a last-minute deal to stave off default. Yields on policy-sensitive two-year Treasuries fell three basis points, trading just below 4%.
Appetite for risk-taking has been sapped by a panoply of factors. The US economy is slowing while inflation is still running hot, and a run of regional bank failures has stirred fears of a credit crunch. In Bank of America Corp.’s latest survey 65% of participants said the economy will weaken, and reported bigger allocations to havens such as cash and big tech.
Read more: BofA Survey Shows Investors Most Pessimistic So Far This Year
Elsewhere, Japan’s Topix equities benchmark climbed to the highest since 1990. A renewed push by Japan’s corporates to increase buybacks and focus on returns is helping boost sentiment, with the Nikkei 225 Stock Average leading gains among Asia’s major benchmarks in 2023.
“We believe Japanese stocks still have further to go,” Fabiana Fedeli, chief investment officer for equities and multi assets at M&G Plc, said on Bloomberg Television. “Companies in Japan were improving their balance sheets and were giving back to shareholders in terms of buybacks and dividends.”
Chinese stocks fell in Shanghai and Shenzhen after official data showed industrial output, retail sales and fixed investment all missed estimates in April. Analysts forecast more policy support later this year.
“Markets are still absorbing some of this morning’s earnings reports, but today’s China data was a little disappointing which is prompting some weakness in luxury retail and basic resources,” said Michael Hewson, chief market analyst at CMC Markets UK.
The dollar retreated against most Group of 10 peers. Crude prices held a modest gain after the International Energy Agency said oil demand will climb more strongly than previously estimated this year.
Key events this week:
- Eurozone GDP, Tuesday
- US retail sales, industrial production, business inventories, Tuesday
- Fed speakers include Cleveland’s Loretta Mester, New York’s John Williams, Atlanta’s Raphael Bostic and Chicago’s Austan Goolsbee, Tuesday
- Eurozone CPI, Wednesday
- BOE Governor Andrew Bailey delivers keynote speech, Wednesday
- US housing starts, Wednesday
- US initial jobless claims, Conference Board leading index, existing home sales, Thursday
- Japan CPI, Friday
- ECB President Christine Lagarde participates in panel at Brazil central bank conference, Friday
- New York Fed’s John Williams speaks at monetary policy research conference in Washington; Fed Chair Jerome Powell and former chair Ben Bernanke to take part in panel discussion, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 was little changed as of 9:33 a.m. London time
- S&P 500 futures were little changed
- Nasdaq 100 futures were little changed
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index rose 0.4%
- The MSCI Emerging Markets Index rose 0.4%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.2% to $1.0894
- The Japanese yen rose 0.2% to 135.79 per dollar
- The offshore yuan fell 0.2% to 6.9745 per dollar
- The British pound was little changed at $1.2524
Cryptocurrencies
- Bitcoin fell 0.5% to $27,225.77
- Ether fell 0.2% to $1,822.13
Bonds
- The yield on 10-year Treasuries declined three basis points to 3.47%
- Germany’s 10-year yield declined three basis points to 2.28%
- Britain’s 10-year yield declined six basis points to 3.76%
Commodities
- Brent crude rose 0.6% to $75.69 a barrel
- Spot gold fell 0.3% to $2,009.95 an ounce
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Anchalee Worrachate and Tassia Sipahutar.
