* Yields on one-month Treasury bills fall from record high
* European shares post largest daily loss in 3 weeks
* Oil gains after Saudi official warns short sellers: ‘watch
out’
NEW YORK/LONDON May 23 (Reuters) – Global equities
retreated and benchmark U.S. Treasury yields eased off two-month
highs on Tuesday as talks over the U.S. debt ceiling continued
without resolution.
Hawkish comments from Federal Reserve officials about the
possibility of further rate hikes sent the U.S. dollar to a
two-month high.
Oil futures extended their rally.
Aides for President Joe Biden and Republican House of
Representatives Speaker Kevin McCarthy, convened again after the
two leaders failed to reach an agreement on Monday on how to
raise the U.S. government’s $31.4 trillion debt ceiling. The
nation is facing the risk of default in as soon as nine days.
“A lot of investors are fixated on the debt ceiling talks.
If this deal starts to become more elusive, we could start to
see more market stress but there is still optimism something
will get done,” said Edward Moya, senior market analyst at OANDA
in New York.
The MSCI world equity index, which tracks
shares in 49 nations, fell 0.96%.
The Dow Jones Industrial Average fell 231.07 points,
or 0.69%, to 33,055.51, the S&P 500 lost 47.05 points, or
1.12%, to 4,145.58 and the Nasdaq Composite fell 160.53
points, or 1.26%, to 12,560.25.
U.S. business activity rose to a 13-month high in May,
lifted by strong growth in the services sector, an S&P Global
survey showed.
The pan-European STOXX 600 index closed down 0.6%,
its steepest one-day percentage fall in three weeks. The STOXX
Europe Luxury 10 logged its largest daily decline
since mid-December, as investors took profit after a stellar run
for the sector amid signs of weakening demand in United States.
Activity data that showed euro zone business growth remained
resilient, if a touch softer than expected.
Julius Baer’s shares fell over 7% after the Swiss
wealth manager reported modest money inflows in the first four
months, disappointing investors who had expected it to benefit
from Credit Suisse’s troubles.
“Without real action on (the debt ceiling front), hawkish
Fed speak has (had) some sway on markets,” Mizuho economist
Vishnu Varathan said, adding that some pressure on U.S.
Treasuries has also lent support to the dollar.
Minneapolis Federal Reserve President Neel Kashkari said on
Monday that it was a “close call” as to whether he would vote to
hike again or pause at next month’s meeting, and St. Louis Fed
President James Bullard said another 50 basis points of hikes
might be required.
The comments caused traders to push back expectations for
U.S. rate cuts from July toward November or December.
Benchmark 10-year U.S. Treasury yields edged down from
two-month highs reached earlier in the session, while yields on
one-month bills fell back from a record high.
The yen fell 0.04% against the dollar.
“The (Bank of Japan’s) ongoing reluctance to tighten
monetary policy further in the near-term combined with a recent
adjustment higher in US rates has triggered renewed upward
momentum for (the dollar versus the yen),” said MUFG senior
currency analyst Lee Hardman in a morning note to clients.
The dollar index, which tracks the greenback against a
basket of six currencies, gained 0.34 point, or 0.33%, to
103.54.
Spot gold prices reversed earlier losses and was up
0.26% to $1,974.59 an ounce by 4:27 p.m. EDT (2027 GMT). Gold
futures settled down 0.14% at $1,974.50.
Elsewhere in commodities, oil prices gained on a tighter
gasoline market outlook and a warning from the Saudi energy
minister to speculators.
Brent crude futures rose 1.1% to settle at $76.84 a
barrel, and U.S. crude prices finished up 1.2% at $72.91.
(Reporting by Tom Westbrook in Singapore, Kane Wu in Hong Kong,
and Alun John in London
Editing by Bernadette Baum and Lisa Shumaker)
