U.S. debt ceiling talks, Turkish election, Fed speakers - what's moving markets

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U.S. debt ceiling talks, Turkish election, Fed speakers - what's moving markets

Investing.com -- Hopes of an end to the political impasse over lifting the U.S. debt ceiling are rising, which should lead to a positive start on Wall Street. Turkey faces more political uncertainty, while U.S. investors await a plethora of Fed speakers throughout the week.

1. Hope over debt ceiling talks

A flicker of optimism emerged over the weekend over the potential for a deal on lifting the U.S. debt ceiling after President Joe Biden said talks with Congress were proceeding.

This followed the cancellation of a planned meeting on Friday to let staff continue discussions.

The interested parties, including Biden and Republican House Speaker Kevin McCarthy, are expected to meet early this week to resume negotiations, and the president seems confident enough of success that he is still planning on flying to Japan for the G7 summit, leaving on Wednesday.

Treasury Secretary Janet Yellen has said the country could run out of money by June 1 unless lawmakers lift the nation's debt ceiling, potentially resulting in the first-ever U.S. debt default.

Such an event posed a "very serious threat to the global economy," U.K. finance minister Jeremy Hunt said on Saturday, as the Group of Seven finance chiefs gathered in Japan.

2. Turkish lira under pressure amid political uncertainty

The Turkish presidential election is set for a runoff ballot later this month, likely resulting in more volatility for the lira, after neither President Tayyip Erdogan nor his opposition rival Kemal Kilicdaroglu cleared the 50% threshold needed to avoid a second round in Sunday’s vote.

With almost 97% of ballot boxes counted, Erdogan led with 49.39% of votes and Kilicdaroglu had 44.92%, according to state-owned news agency Anadolu earlier Monday.

At 05.00 ET (09.00 GMT), the Turkish lira traded 0.5% lower against the dollar at 19.6620, sinking to a new two-month low, even after suspected state bank intervention, with the uncertainty set to continue for two more weeks until May 28.

The Turkish currency has been under pressure since Erdogan authorized a series of unorthodox policies starting in 2018, including interest rate cuts despite record levels of inflation and exchange rate controls.

3. Futures just higher; Fed speakers pepper the week

U.S. futures traded marginally higher Monday, helped by increased optimism surrounding the country’s debt ceiling [see above] at the start of a week that includes the release of key economic data and speeches from a number of Fed officials.

At 05:00 ET (09:00 GMT), the Dow futures contract had gained 95 points or 0.3%, S&P 500 futures inched up 14 points or 0.3%, and Nasdaq 100 futures added 35 points or 0.3%.

The main indices are rebounding following back-to-back weekly losses for the blue-chip Dow Jones Industrial Average and the broad-based S&P 500 as investors fretted about the health of the country’s economy given the Federal Reserve ’s aggressive rate hikes.

The main economic release Monday is the New York Empire State manufacturing index , but the week includes April data on retail sales and industrial production .

Fed Vice Chair for Supervision Michael Barr is to testify before Congress on recent banking sector stresses later this week, while Fed Chair Jerome Powell and former Fed head Ben Bernanke are to participate in a panel discussion on monetary policy in Washington on Friday.

Other Fed officials scheduled to make appearances during the week include New York Fed President John Williams , Cleveland Fed Governor Loretta Mester , Minneapolis Fed President Neel Kashkari and governors Philip Jefferson and Michelle Bowman .

4. Gold sector consolidation

It’s looking likely that the gold sector will see major consolidation this year after Australian gold miner Newcrest Mining (ASX: NCM ) said on Monday it would back Newmont's takeover offer.

The deal is still subject to approval from shareholders of both companies and other regulatory hurdles, but at just under $18 billion this would be the third-largest deal ever involving an Australian company and the third largest globally in 2023, according to data from Refinitiv.

"This transaction will combine two of the world's leading gold producers, bringing forward significant value to Newcrest shareholders through the recognition of our outstanding growth pipeline," said Newcrest Chairman Peter Tomsett.

The deal would make Newmont (NYSE: NEM ) the largest U.S. gold and copper producer by market capitalization, raising its gold output to nearly double its nearest rival, Barrick Gold (NYSE: GOLD ).

5. Oil prices edge higher, but sentiment remains weak

Crude prices edged higher Monday, helped by dollar weakness, but overall sentiment remains weak given concerns over economic weakness in top global oil consumers, the United States and China, in the second half of the year.

By 05:00 ET (09:00 GMT), U.S. crude futures were 0.3% higher at $70.22 a barrel, while the Brent contract edged up by 0.1% to $74.20 per barrel.

The U.S. currency retreated in early trading Monday, making dollar-denominated commodities, including crude, cheaper for holders of other currencies.

However, both benchmarks fell last week for a fourth consecutive week, the longest streak of weekly declines since September 2022, on worries over an uneven re-opening in China while the U.S. faces a growth slowdown.

These demand fears have overshadowed the likelihood of supply tightening in the second half of the year as the Organization of the Petroleum Exporting Countries and its allies, including Russia, make additional output cuts.

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