(Bloomberg) -- Equities started the week on a hesitant note as President Joe Biden and Republican House Speaker Kevin McCarthy prepared to meet Monday in a bid to iron out road blocks in debt-ceiling negotiations.
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Futures on the S&P 500 hovered just below flat, while the tech-heavy Nasdaq was pressured by losses on semiconductor stocks after China said products from Micron Technology Inc. had failed a cybersecurity review. Micron shares dropped more than 5% in New York premarket trading, dragging down other chipmakers, including Nvidia Corp. and Qualcomm Inc. Facebook owner Meta Platforms Inc. fell more than 1.5%, after being hit with a record €1.2 billion ($1.3 billion) European Union privacy fine.
In Europe, Greek markets were a bright spot after Sunday’s national election resulted in a strong showing for Prime Minister Kyriakos Mitsotakis, signaling that investment-friendly policies will continue.
The question for investors is whether US politicians will be able to reach a deal to raise the debt limit before the government runs out of money. Stocks gave up gains late on Friday after Republicans temporarily walked out. The urgency of the situation was underscored on Sunday by Treasury Secretary Janet Yellen, who 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 Plc in London. “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.”
The debt-ceiling risks as well as concern for the US economy have induced investors to boost bearish positions on the S&P 500 to the highest since 2007.
Treasury bond yields ticked lower, led by rate-sensitive two-year notes, as money markets trimmed bets on a June interest-rate hike to just 25%. Federal Reserve Chair Jerome Powell and Minneapolis Fed chief Neel Kashkari, have both signaled in recent days that they would support a pause in rates.
Asian shares rallied as investors focused on Biden’s hints about improving relations with Beijing. His prediction that Sino-US ties would “begin to thaw very shortly” lifted Hong Kong stocks more than 1%.
Investors are keen to see however on how China’s economy is faring after its knee-jerk rebound following the removal of Covid curbs. Iron ore futures dropped for the third day in a row on signs of disappointing steel demand from the construction sector, while the most recent batch of industrial and retail sales data was unexpectedly soft.
In Greece, investors took the strong election support for market-friendly Mitsotakis as a cue that the nation is on track to reclaim an investment-grade rating, 13 years after its default.
The benchmark Athens Stock Exchange General Index jumped to its highest level in almost a decade. The premium investors demand to hold Greek 10-year debt compared with super-safe bonds of Germany, fell to the lowest in more than a year while the cost of insuring exposure to Greek debt fell sharply, according to data from S&P Markit.
Greek Assets Surge as Vote Puts Nation on Path to Credit Upgrade
Key events this week:
Fed presidents speaking are James Bullard, Raphael Bostic and Thomas Barkin, Monday
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 were little changed as of 7:47 a.m. New York time
Nasdaq 100 futures were little changed
Futures on the Dow Jones Industrial Average were little changed
The Stoxx Europe 600 was little changed
The MSCI World index rose 0.1%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro rose 0.1% to $1.0817
The British pound was little changed at $1.2455
The Japanese yen fell 0.2% to 138.29 per dollar
Cryptocurrencies
Bitcoin fell 0.1% to $26,813.64
Ether rose 0.5% to $1,814.22
Bonds
The yield on 10-year Treasuries was little changed at 3.67%
Germany’s 10-year yield was little changed at 2.43%
Britain’s 10-year yield advanced two basis points to 4.02%
Commodities
West Texas Intermediate crude rose 0.2% to $71.70 a barrel
Gold futures fell 0.3% to $1,994.60 an ounce
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Tassia Sipahutar, Richard Henderson, Aline Oyamada and Allegra Catelli.
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2023-05-22 07:21:19Z
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