# Markets edgy as US debt ceiling talks near crunch time Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-05-22 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Markets edgy as US debt ceiling talks near crunch time Meta Description: Asian stocks and Wall Street futures struggle due to stalling debt ceiling negotiations, banking fears, geopolitical worries, and potential default chaos. URL: https://financedigest.com/markets-edgy-as-us-debt-ceiling-talks-near-crunch-timehtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-05-22t010616z1lynxmpej4l010rtroptp4global-markets-1736813987227-compressed.jpg) # Markets edgy as US debt ceiling talks near crunch time By Stella Qiu SYDNEY (Reuters) – Asian stocks and Wall Street futures struggled on Monday as U.S. [debt ceiling](https://www.financedigest.com/dollar-gains-against-yen-as-fed-policy-debt-ceiling-in-focus.html "Dollar gains against yen as Fed policy, debt ceiling in focus") negotiations approached crunch time after stalling last week, while lingering banking fears and fresh geopolitical worries also capped sentiment. U.S. President Joe Biden and House Republican Speaker Kevin McCarthy will meet to discuss the debt ceiling on Monday, less than two weeks before the June 1 [deadline after which Treasury expects the federal government will struggle](https://www.financedigest.com/85-of-firms-struggle-to-comply-with-gdpr-by-deadline-but-opportunity-exists-for-organizations-who-get-it-right.html "85% of firms struggle to comply with GDPR by deadline, but opportunity exists for organizations who get it right") 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. S&P 500 futures lost 0.1% while Nasdaq futures were flat. MSCI’s broadest index of Asia-Pacific shares outside Japan was wobbly and was last up 0.1% for the day. Japan’s Nikkei, which on Friday hit its highest since August 1990, was also mostly unchanged while Australia’s resources-heavy shares slipped 0.3%. South Korea bucked the sluggish trend, gaining 0.8%. Both Chinese bluechips and [Hong Kong’s](https://www.financedigest.com/devere-ceo-at-game-changers-event-in-hong-kong.html "deVere CEO at Game Changers event in Hong Kong") Hang Seng index were up 0.4%, likely encouraged a little by President Biden’s remarks that he expected a thaw in frosty relations with China “very shortly. In the art of brinkmanship, it [feels that to get a deal we must see greater market](https://www.financedigest.com/only-17-of-new-leads-converted-as-sales-teams-and-marketers-feel-the-strain.html "Only 17% of new leads converted as sales teams and marketers feel the strain") volatility,” said Chris Weston, head of research at Pepperstone. “While for much of last week the headlines were that a deal is within reach, the breakdown in talks from Republican negotiators on Friday has many thinking that we could be pushed right to the June deadline before we see an agreement.” Jonathan Pingle, U.S. chief economist at UBS, views the Japanese yen and gold as best placed to benefit from a U.S. default. “Only a 1-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,” said Pingle. “JPY longs against AUD and CAD and gold calls are the cleanest ways to hedge against a U.S. default.” On Friday, reports that debt ceiling negotiations had [reached an impasse rattled markets](https://www.financedigest.com/diphenyl-oxide-market-to-reach-us-150-mn-by-2030.html "Diphenyl Oxide Market To Reach US$ 150 Mn By 2030") even as Federal Reserve Chairman Jerome Powell said U.S. [interest 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. The Fed chief also flagged that after a [year of aggressive rate increases](https://www.financedigest.com/over-50-of-businesses-increased-their-cyber-security-budget-last-year-amid-attacks.html "Over 50% of businesses increased their cyber security budget last year amid attacks"), officials can afford to make “careful assessments” of the impact of rate hikes on the economic outlook, a stance that was viewed as dovish by markets. Futures are pricing in an about a 90% chance that the Fed would keep rates unchanged at its next meeting in June, and a total of almost 50 basis points of cuts by the [end of the year](https://www.financedigest.com/equity-markets-show-strong-end-of-year-performance-in-camradatas-q4-2017-investment-research-reports.html "Equity Markets Show Strong End of Year Performance in CAMRADATA’s Q4 2017 Investment Research Reports"). That has knocked the dollar off a two-month top against a basket of major peers and was last at 103.05 on Monday, flat for the day. Meanwhile, regional U.S. bank shares continued to fall on Friday, as Treasury Secretary Janet Yellen [reportedly warned that more mergers may be necessary after a series of bank](https://www.financedigest.com/banks-recover-75-of-defaulted-debt-owed-by-large-corporate-borrowers-finds-new-global-credit-data-report.html "Banks recover 75% of defaulted debt owed by large corporate borrowers, finds new Global Credit Data report") failures. In Asia, China kept its [key lending rates unchanged on Monday even as an ongoing 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") recovery disappointed. Traders are also digesting the implications of the Group of Seven’s “de-risk, not decouple” approach to China and [supply chains](https://www.financedigest.com/bank-of-barodas-new-digital-supply-chain-finance-solution-from-igtb-to-open-up-raft-of-working-capital-opportunities-for-clients-of-all-sizes.html "Bank of Baroda’s new digital Supply Chain Finance solution from iGTB to open up raft of working capital opportunities for clients of all sizes") flagged at the group’s summit on Sunday. Beijing has summoned the Japanese ambassador to register protests over “hype around China-related issues” at the summit. The government also banned U.S. memory chip manufacturer Micron Technology from [supplying to operators of key](https://www.financedigest.com/the-key-to-supply-chain-data-security.html "The Key To Supply Chain Data Security") infrastructure in the country. Later in the week, the Fed will release minutes of the May meeting on Wednesday while U.S. personal consumption expenditures (PCE) inflation data is due out on Friday. In the Treasuries market, debt ceiling [concerns have created large distortions in the short-end of the yield curve as investors avoid bills that come due when the Treasury is at risk](https://www.financedigest.com/concern-over-us-default-risk-grips-global-markets-as-talks-resume.html "Concern over US default risk grips global markets as talks resume") of running out of funds. The yield on the 1-month Treasury bill jumped 15 basis points to 5.6677% on Monday. Two-year yields were five basis points lower to 4.2340%, pulling away from a recent two-month high, while the 10-year yield also dipped four bps to 3.6516%. [Oil prices reversed earlier gains](https://www.financedigest.com/oil-gains-after-us-leaders-strike-debt-deal.html "Oil gains after US leaders strike debt deal"). U.S. crude futures were down 0.7% to $71.03 per barrel, while Brent crude futures fell 0.6% to $75.12 per barrel. Gold prices were largely unchanged at $1,976.89 per ounce. (Reporting by Stella Qiu; Editing by Sam Holmes and Muralikumar Anantharaman) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---