Stock Futures Edge Up in Shadow of US Debt Talks: Markets Wrap

2023-05-23 07:25

US equity futures rose and contracts for Asian benchmarks pointed to small gains Tuesday after Republican House Speaker

Stock Futures Edge Up in Shadow of US Debt Talks: Markets Wrap

US equity futures rose and contracts for Asian benchmarks pointed to small gains Tuesday after Republican House Speaker Kevin McCarthy said he’d had productive talks with President Joe Biden on the debt ceiling.

Stocks in Japan and Hong Kong were poised for early advances Tuesday, with contracts for Australian shares suggesting marginal increases. S&P 500 futures increased 0.2%, with the investors still on guard as McCarthy said there was no deal yet to ensure the US doesn’t default.

This followed fluctuating fortunes in US markets on Monday, with the S&P 500 drifting between gains and losses before closing flat. The tech-heavy Nasdaq 100 advanced 0.3%, though chipmakers were under pressure after China said products by Micron Technology Inc. failed a cybersecurity review.

Investors are still on tenterhooks seeking signs the deadlock between Democrats and Republicans may break before the government runs out of money. Treasury Secretary Janet Yellen said the chances are “quite low” that the US can pay all its bills by mid-June.

“There is a lot of showmanship around the debt ceiling,” said Sarah Hewin, senior economist at Standard Chartered. “The closer we get to June 1 without a resolution, the greater the risk of an accident, so there is a lot of potential for markets to get concerned.”

In Asia, concern is growing about China’s tepid post-pandemic recovery, which is having a negative impact on key commodity prices such as iron ore and copper. Both have both tumbled in recent trading days.

Still, signs of a geopolitical thaw between the regional powerhouse and the US helped lift Hong Kong stocks more than 1% on Monday, with Biden hinting about improving relations with Beijing.

In the US, yields on short-term Treasuries rose Monday and an index of dollar strength eked out a small rise. Major currencies traded in tight ranges early Tuesday.

Australian and New Zealand government bond yields edged up. Oil markets were little changed with traders avoiding decisive action amid the US debt talks, while gold prices were steady after dipping 0.3% on Monday.

The debt ceiling is “all-consuming now,” wrote Chris Low, chief economist at FHN Financial. “But when Congress raises it, attention will return to the economy and the Fed.”

St. Louis Federal Reserve President James Bullard said he’s thinking of two more rate hikes this year, while Minneapolis Fed President Neel Kashkari said if the US central bank pauses next month it should signal tightening isn’t over.

Elsewhere, Greek markets were a bright spot. Sunday’s national election resulted in a strong showing for Prime Minister Kyriakos Mitsotakis, signaling investment-friendly policies can continue. The benchmark Athens Stock Exchange Index jumped to its highest level in almost a decade. Meanwhile, the Euro Stoxx 600 was little changed on the day.

Key events this week:

Eurozone S&P Global Eurozone Manufacturing & Services PMI, Tuesday
US new home sales, Tuesday
Dallas Fed President Lorie Logan speaks, Tuesday
Fed issues minutes of May 2-3 policy meeting, Wednesday
Bank of England Governor Andrew Bailey speaks, Wednesday
US initial jobless claims, GDP, Thursday
Interest rate decisions in Turkey, South Africa, Indonesia, South Korea, Thursday
Tokyo CPI, Friday
US consumer income, wholesale inventories, durable goods, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures rose 0.2% as of 8:10 a.m. Tokyo time. The S&P 500 was steady Monday
Nasdaq 100 futures rose 0.2%. The Nasdaq 100 rose 0.3%
Nikkei 225 futures rose 0.5%
Australia’s S&P/ASX 200 Index futures rose 0.1%
Hang Seng futures rose 0.3%

Currencies