Wall Street Remains Optimistic Over the Prospect of a US Debt Ceiling Agreement

  • Market Overview

Wall Street was trading in the green on Monday as investors remained optimistic about a debt ceiling agreement following successful staff-level talks over the weekend as the US hurtles toward the 1 June deadline. “President Joe Biden is expected to meet Tuesday with congressional leaders to discuss the debt ceiling limit…after negotiators pinpointed some areas on which congressional staff and the White House can find common ground, including revising the permitting process, rescinding unspent Covid-19 relief funds and potentially cutting spending,” Reuters reported. At 20h00 the Dow was up by 0.14%, while the S&P 500 and the Nasdaq rose by 0.30% and 0.66% respectively.

European stocks recorded modest gains on Monday, with the regional STOXX 600 Index adding 0.30% while the German DAX flatlined. “Mining stocks led gains with a rise of 1.20%, while the chemical, media, and retail sectors saw losses of around 0.20% each. BBVA (BME: BBVA ), a Spanish bank with high exposure to Turkey, fell over 4% as Turkey prepares for a runoff vote following Sunday's election,” Trading Economics added. Meanwhile, the European Commission upwardly revised its economic outlook, pinning GDP growth to 1.10% for 2023 and 1.60% for 2024. It also expects inflation to reach 5.80% in 2023 and 2.80% in 2024.

Asian markets were upbeat on Monday reaching their highest levels in nearly two years, supported by robust domestic earnings and a weak yen. “Investors also cheered data showing producer prices in Japan rose the least in 20 months in April amid signs of easing raw materials costs,” Trading Economics reported. At 20h00 the Nikkei jumped 0.81%, while the Hang Seng and Shanghai Composite Index advanced 1.89% and 1.17% respectively.

Led by a decline in retailers and precious metals, the FTSE/JSE All Share Index (ALSI) fell 0.09%, while the local currency broke a four-day losing streak on Monday as apprehensions about relations between South Africa and the US eased. Reports surfaced that “Washington and Pretoria are working on patching up diplomatic relations after last week’s accusations that SA provided weapons to Russia. President Cyril Ramaphosa maintains that SA is not taking sides in the Russia/Ukraine war, while Finance Minister Enoch Godongwana says several actions were taken to ensure that SA’s relationship with the US remains cordial,” Business Day reported. At the close of business, the rand was trading at R19.05/USD, R23.87/GBP and R20.72/EUR.

Brent crude futures fell to $73.55 a barrel, while US West Texas Intermediate crude was at $69.48 a barrel on Monday “as concerns about fuel demand in the US and China offset bullish sentiment about tightening supplies from any Opec+ cuts and a resumption in US buying for reserves. This follows the longest streak of weekly declines since September 2022 (seen last week), over concern the US could enter a recession on the back of significant risk of a historic default within the first two weeks of June,” Reuters reported. Gold prices inched up as anxieties over an economic slowdown propelled investors towards the safe-haven metal on Monday. Spot gold was up 0.20% trading at $2 014.44 per ounce, while US gold futures were flat at $2 019.10.

PSG Wealth Daily Investment Update, 16 May 2023

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