# Concern over US default risk grips global markets as talks resume Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-05-22 Category: FINANCE Category URL: https://financedigest.com/category/finance Meta Title: US Default Risk Concern Grips Global Markets Amid Debt Meta Description: Gripping uncertainty as U.S. debt ceiling talks resume, affecting equities, oil futures, and gold prices. Stay informed with the latest updates. URL: https://financedigest.com/concern-over-us-default-risk-grips-global-markets-as-talks-resumehtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-05-22t010616z1lynxmpej4l010rtroptp4global-markets-1-1736813985770-compressed.jpg) # Concern over US default risk grips global markets as talks resume By Chris Prentice and Nell Mackenzie NEW YORK/LONDON (Reuters) -Unease over how U.S. [debt ceiling negotiations will pan out gripped global markets](https://www.financedigest.com/markets-edgy-as-us-debt-ceiling-talks-near-crunch-time.html "Markets edgy as US debt ceiling talks near crunch time") on Monday, with equities mixed and U.S. [treasury yields](https://www.financedigest.com/world-equities-fall-u-s-treasury-yields-rise-after-hawkish-fed.html "World equities fall, U.S. Treasury yields rise after hawkish Fed") modestly higher. [Oil futures were higher as demand](https://www.financedigest.com/opec-seen-sticking-to-policy-despite-higher-oil-demand.html "OPEC+ seen sticking to policy despite higher oil demand") optimism offset the default concerns. Gold prices retreated following [hawkish comments](https://www.financedigest.com/euro-jumps-after-hawkish-comments-from-ecbs-lagarde.html "Euro jumps after hawkish comments from ECB’s Lagarde") from a Federal Reserve official. U.S. President Joe Biden and [House Republican](https://www.financedigest.com/analysis-u-s-regulators-could-be-pressured-by-slim-republican-house-control.html "Analysis-U.S. regulators could be pressured by slim Republican House control") Speaker Kevin McCarthy will meet to discuss the debt ceiling on Monday, less than two weeks before a June 1 deadline after which Treasury expects the federal government will struggle to pay its debts. A failure to lift the [debt ceiling would trigger a default](https://www.financedigest.com/explainer-how-wall-street-is-preparing-for-possible-us-debt-default.html "Explainer-How Wall Street is preparing for possible US debt default"), likely sparking chaos in financial markets and a spike in interest rates. We expect a resolution to be reached before the deadline, but anticipate unforeseen developments throughout the process,” said Bruno Schneller, a managing [director](https://www.financedigest.com/tmwi-appoints-matt-franceschi-as-deputy-managing-director-to-help-spearhead-the-integrated-media-agencys-ongoing-growth.html "tmwi appoints Matt Franceschi as Deputy Managing Director to help spearhead the integrated media agency’s ongoing growth") at INVICO Asset Management. Broader [economic](https://www.financedigest.com/the-impact-of-economic-indicators-on-financial-markets-understanding-the-key-drivers.html "The Impact of Economic Indicators on Financial Markets: Understanding the Key Drivers") indicators in multiple countries indicate a slowdown, he said. The MSCI [world equity index](https://www.financedigest.com/world-food-price-index-falls-for-sixth-month-in-sept-fao.html "World food price index falls for sixth month in Sept -FAO"), which tracks shares in 49 nations, gained 0.2% by 10:22 a.m. EDT (1422 GMT). The Dow Jones [Industrial Average fell 102.69 points](https://www.financedigest.com/gas-price-surge-pushes-europes-ceramics-industry-to-breaking-point.html "Gas price surge pushes Europe’s ceramics industry to breaking point"), or 0.31%, to 33,324.12, the gained 3.14 points, or 0.07%, to 4,195.12 and the gained 51.51 points, or 0.41%, to 12,709.41. [Europe’s STOXX](https://www.financedigest.com/telecom-italia-tops-europes-stoxx-600-amid-spiking-covid-19-cases.html "Telecom Italia tops Europe’s STOXX 600 amid spiking COVID-19 cases") 600 index fell 1.39%, while Europe’s broad FTSEurofirst 300 index retreated 0.13%. Jonathan Pingle, U.S. [chief economist](https://www.financedigest.com/ecb-should-raise-rates-at-steady-pace-chief-economist-says.html "ECB should raise rates at steady pace, chief economist says") at UBS, said the Japanese yen and gold were best placed to benefit from any U.S. default. Only a one-month long impasse post the X-date is likely to cause a tightening of financing conditions sharp enough that it causes the [dollar to rally strongly,”](https://www.financedigest.com/ea-lowers-bookings-expectation-on-strong-dollar-gaming-slowdown.html "EA lowers bookings expectation on strong dollar, gaming slowdown") said Pingle. CHIP BAN [Asian share](https://www.financedigest.com/asian-shares-slump-as-powell-warns-on-inflation.html "Asian shares slump as Powell warns on inflation") rose after China on Sunday barred U.S. firm [Micron from selling memory chips](https://www.financedigest.com/samsung-micron-warn-chinas-xian-lockdown-could-disrupt-memory-chip-manufacturing.html "Samsung, Micron warn China’s Xian lockdown could disrupt memory chip manufacturing") to key domestic industries over security concerns. The ban helped [stocks](https://www.financedigest.com/mutual-funds-vs-stocks-which-is-better.html "stocks") of Micron’s rivals in China and elsewhere, which are likely to benefit as mainland companies seek memory products from other sources. However, market jitters about the U.S. [debt ceiling](https://www.financedigest.com/world-stocks-climb-on-hopes-of-successful-debt-ceiling-outcome.html "World stocks climb on hopes of successful debt ceiling outcome") remained pervasive. On Friday, as negotiations reached an impasse, Federal Reserve Chairman Jerome Powell said [rates might not need](https://www.financedigest.com/ecb-needs-to-keep-interest-rates-sustainably-high-to-combat-inflation-lagarde.html "ECB needs to keep interest rates ‘sustainably high’ to combat inflation – Lagarde") to rise as much given the tighter credit conditions from the banking crisis. On Monday, Minneapolis Federal Reserve President Neel Kashkari said it was a “close call” whether he would [vote to raise interest rates or pause the central bank’s](https://www.financedigest.com/czech-central-bank-vice-gov-unlikely-to-vote-for-rate-cut-newspaper.html "Czech central bank vice-gov unlikely to vote for rate cut -newspaper") tightening cycle when it meets next month. Gold prices fell 0.35% to $1,969.70 an ounce. Futures are pricing in close to a 90% chance that the [Fed will keep rates](https://www.financedigest.com/dollar-bounces-as-fed-seen-keeping-up-aggressive-rate-hikes.html "Dollar bounces as Fed seen keeping up aggressive rate hikes") unchanged at its next meeting in June, and a total of almost 50 basis points of cuts by the end of the year. The [yield on benchmark 10-year Treasury](https://www.financedigest.com/stocks-tumble-on-inflation-fears-treasury-yields-jump.html "Stocks tumble on inflation fears, Treasury yields jump") notes traded at 3.6976% compared with Friday’s close of 3.692%. The two-year yield, which rises with traders’ [expectations of higher Fed fund rates](https://www.financedigest.com/dollar-slips-before-expected-fed-rate-hike.html "Dollar slips before expected Fed rate hike"), touched 4.3048% compared with previous close of 4.289%. The [dollar index](https://www.financedigest.com/dollar-index-jumps-after-u-s-retail-sales-show-surprise-rebound.html "Dollar index jumps after U.S. retail sales show surprise rebound"), which tracks it against a basket of major currencies, was up at 103.25, but still off last week’s two-month high. The [euro was flat against the dollar](https://www.financedigest.com/dollar-higher-on-risk-aversion-euro-revisits-parity.html "Dollar higher on risk aversion; euro revisits parity") at $1.0808. In Asis, [China kept its key lending rates](https://www.financedigest.com/stocks-struggle-as-china-rate-cut-sends-oil-tumbling.html "Stocks struggle as China rate cut sends oil tumbling") unchanged on Monday even as an economic recovery disappointed. Traders were also digesting the implications of the Group of Seven’s “de-risk, not decouple” approach to China and [supply chains](https://www.financedigest.com/eliminating-payment-barriers-the-future-of-supply-chain-payments-is-digitization.html "Eliminating Payment Barriers: The Future of Supply Chain Payments is Digitization") that the group flagged at its summit. MSCI’s broadest index of Asia-Pacific [shares outside](https://www.financedigest.com/outside-door-handle-market-analysis-trends-top-manufacturers-share-growth-statistics-opportunities-and-forecast-to-2027.html "Outside Door Handle Market Analysis, Trends, Top Manufacturers, Share, Growth, Statistics, Opportunities and Forecast to 2027") Japan were up 0.6%. U.S. crude ticked up 0.28% to $71.75 a barrel. Brent crude rose to $75.67 per barrel. The [Fed will release minutes](https://www.financedigest.com/dollar-jumps-euro-dips-before-fed-minutes.html "Dollar jumps, euro dips before Fed minutes") of its May meeting on Wednesday. U.S. personal consumption expenditure [inflation data](https://www.financedigest.com/soft-lending-and-inflation-data-pave-way-for-smaller-ecb-hike.html "Soft lending and inflation data pave way for smaller ECB hike") is expected on Friday. (Reporting by Chris Prentice, Nell Mackenzie, Stella Qiu and Rae Wee; Graphics by Kripa Jayaram and Lewis Krauskopf; Editing by Sam Holmes, Muralikumar Anantharaman and Jane Merriman) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---