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(Provisional) agreement reached in US debt dispute

The White House and the Republicans in the House of Representatives have reached a preliminary agreement to raise the debt ceiling for two years and to limit spending, as House Speaker Kevin McCarthy confirmed. On the stock exchanges, the agreement in Washington did not cause any big jumps in the holiday-related thin trading on Whit Monday and had already been priced in for the most part. 

Alessandro Fezzi, LGT
Temps de lecture
5 minutes
US Capitol
© Shutterstock

US President Joe Biden and opposition leader McCarthy reached a compromise, or rather a preliminary agreement, over the weekend. The two-year agreement would postpone the next debt ceiling increase until after the 2024 elections. Both sides now must push the "deal" through both chambers of Congress - no easy as Republicans control the House of Representatives and Democrats the Senate. McCarthy said on Saturday night that he expected the House of Representatives to vote on the agreement reached with the White House on Wednesday. The deal must be passed before 5 June to prevent a US default - a scenario that could trigger a global recession and the loss of millions of jobs.

Wall Street was not trading on Whit Monday because of the Memorial holiday. Europe's stock markets remained quiet at the start of the week in thin holiday trading. The EuroStoxx 50 and the DAX in Frankfurt had to give up initial gains over the day.

Stock markets in the Asia-Pacific region trended mixed on Tuesday before the US Congress is expected to vote on Wednesday on the bill to raise the debt ceiling to prevent a default for the US economy. In Tokyo, the Nikkei 225 traded about 0.3% higher and in Seoul, the Kospi rose nearly one per cent after a holiday. Hong Kong stocks broke a four-day losing streak. The Hang Seng Index rose 0.5% and the Hang Seng Tech Index gained about 1%. Markets in mainland China were mixed on Tuesday, with the Shanghai Composite falling 0.2% and the Shenzhen Component gaining 0.1%.

In Turkey, incumbent Recep Tayyip Erdogan prevailed in the runoff election. The Turkish lira weakened, returning to the record low reached only last week.

Corporate news in focus: Douglas Q2 and half-year figures, Hewlett Packard Enterprise and HP Inc. Q2 figures.

Economic data in focus: Spain consumer prices May (09:00 CET), Switzerland KOF economic barometer May and GDP Q1 (09:00), Eurozone consumer confidence and economic sentiment survey May (11:00), US consumer confidence May (16:00).


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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