Stocks Fluctuate as US Debt Talks Slow; Earning Bonds: Wrapping the Markets

(Bloomberg) — Global markets were mixed on Tuesday, with US stock futures trading in a narrow range ahead of debt ceiling talks. Japan’s Topix index closed at its highest level since 1990 and the pound sterling fell.

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A standoff over raising the federal debt limit sidelines many investors as they wait for a breakthrough in Washington. In Europe, shares of Vodafone Group Plc sank on weak earnings and Telecom Italia SpA slumped after a report that the Italian state lender would drop its bid for the carrier’s landline network. More broadly, the Stoxx Europe 600 in the region was little changed.

“We’re all looking forward to Congress and the White House to see how the US debt ceiling discussions move forward,” said Joachim Clement, Liberum Capital’s head of strategy, accounting and sustainability. ā€œNow that we have enough clarity on central bank policy and close to the peak of the rate hike cycle, investors are looking for clarity on the political front ahead of the upcoming earnings season.ā€

Debt ceiling talks are scheduled for Tuesday between President Joe Biden and House Speaker Kevin McCarthy. Treasury Secretary Janet Yellen warned that the US is already paying the price for its failure to raise the federal debt limit and stressed that her department could run out of cash as soon as June 1.

However, most investors say they expect the politicians to strike a deal at the last minute to stave off default. The policy-sensitive two-year Treasury yield fell by three basis points, to trade just under 4%.

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The appetite for risk has diminished due to a combination of factors. The US economy is slowing while inflation is still very high, and a series of regional bank failures have raised fears of a credit crunch. In Bank of America Corp.’s most recent survey, 65% of respondents said the economy would weaken, and reported larger allocations to havens like cash and big tech.

Read more: BofA survey shows investors are most pessimistic so far this year

Elsewhere, Japan’s benchmark Topix stock index rose to its highest level since 1990. A renewed push by Japanese companies to increase buybacks and focus on yields helps boost sentiment, with the Nikkei 225 Stock Average leading gains among major Asian indices in 2018. 2023.

“We think Japanese stocks still have more to go,” Fabiana Fedeli, chief investment officer for equities and multi-asset at M&G Plc, said on Bloomberg TV. “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 that industrial production, retail sales and fixed investment all missed estimates in April. Analysts expect more political support later this year.

“Markets are still digesting some of this morning’s earnings reports, but today’s China data was a bit disappointing resulting in some weakness in luxury retail and underlying resources,” said Michael Hewson, chief market analyst at CMC Markets UK.

The dollar fell against most of its peers in the Group of Ten. Crude oil prices maintained modest gains after the International Energy Agency said that demand for oil will rise more strongly than previously estimated this year.

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Main events this week:

  • Eurozone GDP, Tuesday

  • US Retail Sales, Industrial Production, Business Inventories, Tuesday

  • Speakers at the Federal Reserve include Loretta Mester of Cleveland, John Williams of New York, Raphael Bostick of Atlanta, and Austin Goolsby of Chicago, Tuesday.

  • Eurozone CPI, Wednesday

  • Bank of England Governor Andrew Bailey delivers a keynote address on Wednesday

  • Residences begin in the US, Wednesday

  • US Initial Jobless Claims, Conference Board’s leading indicator, Existing Home Sales, Thursday

  • Japanese CPI, Friday

  • European Central Bank President Christine Lagarde takes part in a panel discussion at the Central Bank of Brazil conference, Friday

  • John Williams of the Federal Reserve Bank of New York speaks at a monetary policy research conference in Washington. Federal Reserve Chairman Jerome Powell and former Chairman Ben Bernanke to participate in a panel discussion on Friday

Some of the major movements in the markets:

Stores

  • The Stoxx Europe 600 was little changed as of 9:33 AM London time

  • S&P 500 futures changed little

  • Nasdaq 100 futures have changed little

  • Futures contracts on the Dow Jones Industrial Average changed little

  • The MSCI Asia Pacific Index rose 0.4%.

  • The MSCI Emerging Markets Index rose 0.4%.

currencies

  • The Bloomberg Spot Dollar Index has not changed

  • The euro rose 0.2 percent to $1.0894

  • The Japanese yen rose 0.2% to 135.79 per dollar

  • The offshore yuan fell 0.2 percent to 6.9745 per dollar

  • The British pound has not changed much at $1.2524

Digital currencies

  • Bitcoin fell 0.5 percent to $27,225.77

  • Ether fell 0.2% to $1,822.13

bonds

  • The yield on the 10-year Treasury fell three basis points to 3.47%.

  • Germany’s 10-year yield fell three basis points to 2.28%.

  • The yield on UK 10-year bonds fell six basis points to 3.76%.

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goods

  • Brent crude rose 0.6 percent to $75.69 a barrel

  • Spot gold fell 0.3 percent to $2,009.95 an ounce

This story was produced with help from Bloomberg Automation.

ā€” with assistance from Anchalee Worrachate and Tassia Sipahutar.

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