The dispute over the almost inevitable increase in the debt ceiling in the US remains one of the defining issues on the international financial markets. Democrats and Republicans must reach an agreement in about two weeks, otherwise the government in Washington faces the threat of default as early as the beginning of June. Today, US President Joe Biden and the Republican negotiator, Kevin McCarthy, want to meet again for top-level talks. At the G7 summit in Japan, sanctions against Russia were tightened again and it was emphasised that the G7 countries want to reduce their economic dependence on China.
On the New York Stock Exchange, the share indices fell again somewhat after the previous day's significant gains. The conflict about a solution to the debt dispute in Washington continues to cause uncertainty. According to US Treasury Secretary Janet Yellen, the government could default on 1 June if the debt ceiling is not raised. US President Joe Biden was once again optimistic despite the difficult negotiations. Some quarterly reports also put a damper on Friday. For example, the US sports shoe and sneaker retailer Foot Locker significantly lowered its sales forecast for the current year, which raised concerns for the entire retail sector. The Dow Jones Industrial had to give back initial gains and closed on Friday at 33'426.63 points, 0.33% lower than the previous day. On a weekly basis, it remained narrowly positive (+0.38%). The S&P 500 lost 0.14% before the weekend, exiting at 4'191.98 points. On Thursday, when European markets were closed for the holiday, the S&P 500 had reached its highest level since last August. On the Nasdaq, the technology indices lost around 0.2% on Friday. On the bond market, the yield on ten-year US government bonds climbed to 3.7% before the weekend and is trading at 3.66% this morning.
At the G7 summit in Hiroshima, the focus was on the Ukraine war and the conflict with Russia, as well as on relations with China. The final declaration stated: Economic resilience requires risk reduction and diversification. The G7 countries wanted "constructive and stable relations" with China, and it was important to cooperate with China on global challenges.
In Asia, stock markets started the new week mostly with gains. In Tokyo, the Nikkei 225 rose 0.1%, keeping the Japanese stock market at its highest level since 1990. Hong Kong's Hang Seng Index rose 1.3%, leading the region's gains, while the Hang Seng Tech Index gained 2.2%. In mainland China, the Shanghai Composite rose 0.15% and the Shenzhen Component gained 0.2% after China's central bank left its benchmark one-year and five-year lending rates unchanged.
This week's focus will include the latest purchasing managers' survey data for the industrial sector in Europe and the US on Tuesday and the minutes of the Federal Reserve's latest monetary policy decision on May 3 on Wednesday.
Corporate news in focus: Ryanair's annual results and Zoom Video Communications' Q1 figures. JPMorgan Investor Day and Ford Motor Capital Markets Day.
Economic data in focus: Q1 industrial production (08:30 CET), Eurozone consumer confidence in May (16:00).
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.