Global Markets Lower on US Debt Ceiling Vote Uncertainty

  • Market Overview

The FTSE/JSE All Share Index (ALSI) trailed weaker global markets on Wednesday as investors anticipated the outcome of a vote on the US debt ceiling just four days before the deadline. The tentative deal cleared an important hurdle on Tuesday, after the House Rules committee approved legislation that would temporarily suspend the borrowing ceiling and set a limit on government spending by a vote of 7 to 6, sending it to the House of Representatives for a vote on final passage. Once the House has approved the deal, the Senate will then vote on it. The rand , which has lost more than 16% of its value against the USD so far this year, remained under pressure on Wednesday, trading at R19.72/$ at 22h50.

All three major US indices ended the day in the red on Wednesday, anchored by expectations that US Federal Reserve (Fed) would further increase interest rates in June. For the month, the Nasdaq Composite gained 5.80% due to a rally in artificial intelligence-related stocks. However, the Dow shed 3.50% and the S&P 500 inched up 0.25% last month as broader economic concerns weighed on market sentiment.

For a third consecutive session, European stock markets also lowered as US debt ceiling jitters dampened sentiment. Concerns about a potential global economic slowdown were exacerbated by China's lacklustre industrial activity in May, “heaping pressure on policymakers to shore up a patchy economic recovery, “Reuters added. There was some good news though, as recent CPI data for Germany and France showed a marked reduction in inflationary pressures in May. Asian markets fell on Wednesday, with the Hang Seng declining by 1.94%, falling 8.50% for the month and remaining at its lowest level in six months. The Nikkei also ended lower at 1.41%, pulled down by the global selloff. Investors digested information suggesting that April's industrial production in Japan unexpectedly fell, while retail sales growth fell short of expectations.

Wednesday saw a 0.10% drop in Brent crude futures to below $72 per barrel, bringing the monthly loss for May to almost 11%. This decline came amid worries about a slowdown in demand, particularly from China which is a top petroleum importer. New PMIs for the world's second-largest economy showed a further decline in factory activity as well as a slowdown in services and construction in May, highlighting the lacklustre character of the ongoing recovery and the declining demand for commodities.

PSG Wealth Daily Investment Update, 01 June 2023

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