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No breakthrough in US debt dispute - investors' nerves remain tense

The top-level talks between US President Joe Biden and Kevin McCarthy, the chief negotiator for the opposition Republicans, did not bring the hoped-for breakthrough in the dispute over raising the debt limit after the close of trading in New York. McCarthy at least spoke of "a productive and professional conversation." As a result, investors on capital markets remained cautious. 

Alessandro Fezzi, LGT
Reading time
5 minutes
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The Dow Jones Industrial ended Monday's trading session down 0.42% at 33'286.58 points and the market-wide S&P 500 was virtually unchanged from Friday's close at 4'192.63 points. On the Nasdaq, however, the indices rose by around 0.3% at the start of the week. There was no breakthrough in the US debt dispute last night, which means that the world's largest economy is still threatened with default at the beginning of June. However, it should be borne in mind that negotiations up to the last minute are nothing unusual in Washington and reflect the extremely tight majority situation in the centre of power in the US. In the meantime, US monetary policy is coming back into focus after Federal Reserve Chairman Jerome Powell, against the backdrop of the recent turbulence in the banking sector, nurtured hopes of an interest rate pause in June. The record fine of 1.2 billion euros for the Facebook company Meta for a violation of the European Data Protection Regulation (GDPR) was a topic of conversation on the stock exchange floor. This concerns Facebook's involvement in mass surveillance by Anglo-American intelligence services, which was uncovered ten years ago by whistleblower Edward Snowden.

On Asia's stock exchanges, the share indices trended inconsistently on Tuesday. In Tokyo, the Nikkei 225 had to give back earlier gains and closed around 0.2% lower. On the positive side, the purchasing managers' index for Japan's industrial sector showed a growth trend in May for the first time since October 2022, at 50.8 points (previous month 49.5). In Seoul, the Kospi traded 0.5% higher, while Hong Kong's Hang Seng index fell 0.6%. Mainland Chinese markets also traded lower than the previous day. The Shanghai Composite fell 0.6% and the Shenzhen Component slipped 0.15%.

Europe's main stock markets closed little changed on Monday. On the economic front, consumer sentiment in the euro area improved minimally in May. The EU Commission's consumer confidence indicator improved by 0.1 to -17.4 points, while economists on average had expected an increase to -16.8 points. Since last autumn, consumer sentiment has tended to brighten, but the barometer remains below the long-term average. The lowest value was recorded in September 2022 at -28.7 points.

Corporate news in focus: Julius Baer Q1 sales. Roche ESG event and annual general meetings of Shell, Société Générale and Merck & Co.

Economic data in focus: Purchasing managers' surveys France (09:15 CET), Germany (09:30), Eurozone (10:00), UK (10:30) and US (15:45). In the US, data on new home sales and the Federal Reserve's Richmond Industrial Activity Index.

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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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