Wall Street stocks eked out small gains on Monday as investors kept a close eye on negotiations around the US debt ceiling, with president Joe Biden and House speaker Kevin McCarthy due to meet after the markets close.
The benchmark S&P 500 was up 0.4 per cent in afternoon trading, while the tech-heavy Nasdaq Composite added 0.8 per cent.
Both indices fell in the previous session, after US policymakers paused negotiations over the debt ceiling deal, raising the risk that they will fail to reach a compromise ahead of the early-June deadline and trigger an unprecedented default.
Biden and McCarthy discussed the debt ceiling issue over the phone on Sunday.
McCarthy told reporters at the Capitol on Monday afternoon that a “majority of Republicans will see” that what is being negotiated at present “is a right place to put us on the right path”.
“We can get a deal tonight, we can get a deal tomorrow,” he said.
Meanwhile, markets were encouraged by Fed chair Jay Powell, who warned on Friday that tighter credit conditions, brought about by the US regional banking turmoil, could limit how far the central bank needed to raise interest rates to bring inflation back to its 2 per cent target.
Traders awaited Tuesday’s release of the US purchasing managers’ index, which tracks monthly changes in manufacturing and services activity, signalling the extent to which high interest rates have slowed the economy.
“As long as growth is holding, the market can deal with [the increase in] rates,” said Emmanuel Cau, head of European equity strategy at Barclays.
“What you don’t want is a clear loss of momentum in the economy that will mean that central banks have done too much and now we are shifting from inflation to recession,” he noted.
According to a survey published by the Fed on Monday, the share of US adults reporting that they were “doing at least okay financially” fell 5 percentage points in 2022 to 73 per cent, marking one of the lowest readings since 2016.
The yield on interest rate-sensitive two-year Treasury notes rose 0.03 percentage points to 4.32 per cent, while the yield on the benchmark 10-year note rose 0.03 percentage points to 3.72 per cent. Bond yields rise when prices fall.
Greece’s main stock market, the Athex Composite index, closed up 6.1 per cent at an eight-year high, a day after an election in which Prime Minister Kyriakos Mitsotakis routed his rivals and came one step closer to securing another four-year term.
Banks were among the biggest movers, with Eurobank up 8.5 per cent, National Bank of Greece up 15.3 per cent and Piraeus Financial Holdings rising 13.5 per cent.
Greek bonds rose, with the yield on 10-year debt falling 0.14 percentage points to 3.88 per cent, its lowest level since early December.
Trading in Europe struggled for direction. The region-wide Stoxx 600 ended flat, Germany’s Dax fell 0.3 per cent and the FTSE 100 added 0.2 per cent.
The eurozone’s consumer confidence index came in at minus 17.4 in May, lower than forecast by a Reuters poll of economists, in a sign that high interest rates and inflation weighed on the region more than expected.
In Asia, Hong Kong’s Hang Seng index gained 1.2 per cent, China’s CSI 300 rose 0.6 per cent and Japan’s Topix added 0.7 per cent.
Chinese semiconductor sector stocks jumped after Beijing banned operators of important infrastructure from buying products by US chipmaker Micron Technology, saying it posed “serious network security risks”.
Semiconductor Manufacturing International, China’s top contract chipmaker, gained 1.2 per cent on Monday, while the second-biggest, Hua Hong Semiconductor, added 0.9 per cent in Hong Kong. The Hang Seng tech index gained 2.1 per cent.
