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US fiscal uncertainty pressures market sentiment

The US Treasury Department experienced weak demand for a USD 16 billion sale of 20-year bonds on Wednesday, reflecting investor concerns over the nation's escalating debt and fiscal outlook. The poor auction follows Moody’s recent downgrade of the US sovereign rating. Investor apprehension is also heightened by Congress's tax and spending bill at the moment, which is expected to significantly increase the national deficit. That put US equity markets under pressure midweek, while the US dollar index continued to fall. Stocks in Asia were also trading lower and Europe was set to open in the red on Thursday. Bitcoin rose to a record high as investors sought alternatives to US assets, while gold also saw gains.

  • Date
  • Auteur Shane Strowmatt, LGT
  • Temps de lecture 5 minutes

US dollars
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US stock markets suffered significant losses on Wednesday due to rising concerns over the increasing US fiscal deficit. The Dow Jones Industrial Average fell by 1.9% to 41,860.44 points, while the S&P 500 decreased by 1.6% to 5844.61 points, and the Nasdaq 100 dropped by 1.3% to 21,080.36 points. The declines stem from a poorly received auction of US Treasury bonds, which led to higher yields with the benchmark ten-year yield trading around 4.6%.

Asian markets follow Wall Street down

The negative sentiment spilled over to the Asia-Pacific region, where equity markets were trading lower on Thursday, following Wall Street's decline. Japan’s Nikkei 225 was down 0.8%, and Korea’s Kospi fell 1.2%. Australia’s S&P/ASX 200 was 0.4% lower, while Hong Kong’s Hang Seng Index dropped 0.8%. Mainland China’s CSI 300 was trading essentially flat. European markets were also expected to open lower on Thursday.

Bitcoin hits record high on regulatory optimism

One beneficiary of the fiscal concerns was bitcoin, which surged to a new record high above USD 111,000 on Thursday. The optimism was driven by US regulatory advancements, particularly the GENIUS Act, which aims to establish a national framework for stablecoins. The cryptocurrency reached USD 111,834, surpassing its previous record of roughly USD 109,000, and has climbed over 18% in May. Increased adoption and strong inflows into US-listed spot Bitcoin ETFs further bolstered demand.

UK inflation surges in April

UK inflation rose to 3.5% in April from 2.6% in March, driven by a significant increase in Easter airfares, according to data released on Wednesday. This rise exceeded both economists' and the Bank of England's forecasts, leading investors to push back expectations for interest rate cuts. Sterling strengthened against the US dollar following the release of the data.

Corporate and economic calendar

Corporate news in focus: Quarterly figures from Intuit, NextEra Energy, and Verizon. Annual general meetings at Brenntag, Charles Schwab, Deutsche Bank, Home Depot, and Safran.

Economic data in focus: French Purchasing Managers' Index (09:15), German Purchasing Managers' Index (09:30), German ifo Business Climate Index (10:00), euro-area Purchasing Managers' Index (10:00), UK Purchasing Managers' Index (10:30), US weekly initial jobless claims (14:30), S&P Global US Purchasing Managers' Index (15:45), US existing home sales (16:00).

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Global economic and market trends at a glance

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