Latest version: May 30, 2023, 01:28 AM IST
London, United Kingdom (UK)
Asian stocks were mostly higher, with Tokyo’s Nikkei hitting a new 33-year high. But Chinese stocks fell after data showed declining profits at Chinese industrial firms.
The US debt deal is expected to provide only short-term relief for markets, as concerns about inflation and further rate hikes linger.
European stock indexes edged lower on Monday and euro zone bond yields fell, but news that the U.S. reached a debt ceiling deal over the weekend kept Wall Street futures positive.
US President Joe Biden and top congressional Republican Kevin McCarthy on Saturday reached a tentative agreement to raise the federal government’s $31.4 trillion debt ceiling in a bid to stop the United States from defaulting on its debt.
The deal is expected to provide only short-term relief for markets, as concerns about inflation and further rate hikes linger.
Asian stocks were mostly higher, with Tokyo’s Nikkei hitting a new 33-year high. But Chinese stocks fell after data showed declining profits at Chinese 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 rose, with the S&P 500 e-minis up 0.2% and the Nasdaq e-minis up 0.3%. US and UK markets were closed for public holidays.
US six-month credit default swaps have contracted, meaning the cost of insuring short-term US credit default exposures has fallen. But five-year swaps rose, suggesting some caution in the market about the deal.
The US House Rules Committee said it would meet Tuesday afternoon to discuss the debt ceiling bill, which must pass a divided Congress before June 5.
If the debt ceiling deal passes Congress, market attention will turn to the US Federal Reserve’s rate plans, according to Sami Char, chief economist at Lombard Odier.
“Growth, particularly in the US, remains quite resilient. Inflation is pretty sticky,” said Char.
“We’re back to the narrative where the Fed has to put more emphasis on bringing down inflation, and that’s obviously going to create market anxiety because when you raise rates, instead of lowering rates, you put pressure on valuations.”
Markets are leaning toward expectations that the Fed will raise rates by 25 basis points next month, then hold rates steady for the rest of the year.
The Fed’s preferred inflation gauge, the personal consumption price index, came in higher than expected on Friday and hit their highest in more than two months after two years of U.S. yield data. Treasuries were not traded on Monday. U.S. Treasury note futures rose about 0.24% in a sign that U.S. Treasury yields will fall when bond trading resumes.
Euro zone government bond yields were lower on Wednesday and Thursday ahead of euro zone inflation data. The benchmark 10-year German yield fell 10 basis points to 2.43%.
The US dollar index was steady at 104.26 and the euro was down 0.2% at 1.07105. The dollar briefly touched a six-month high against the yen during Asian trading.
In Turkey, the lira hit a new record against the dollar after President Tayyip Erdogan won a presidential election on Sunday, extending his increasingly authoritarian rule into a third decade.
Oil prices fell, with Brent crude futures down 1% and US West Texas Intermediate crude down 0.6%. Gold was little changed, near a two-month low on Friday.
(This story has not been edited by News18 staff and appears from a syndicated news agency feed – Reuters)
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