Markets are nervous about the U.S. debt ceiling deadline, with talks ongoing to avoid a potential default. The US Treasury reported on Monday that it spent $52.5 billion in a single day, with $50.9 billion in interest payments alone. The market is stuck in a rut, with Asian markets unstable and the dollar hanging above a five-week high. European markets are set to open lower, with traders anticipating eurozone inflation data for April. Investors can expect hawkish rhetoric from Fed speakers this week to keep them guessing about interest rates, while the US dollar held steady as traders cut back on bets on imminent US rate cuts after solid consumer spending data.
The US top index closed slightly lower on Tuesday, supported by a few giants, while the rest was down significantly. The main focus was on Home Depot and softer consumer spending in April, as well as uncertainty over interest rates and debt limit negotiations. Home Depot's annual sales forecast was cut, and its profit decline was steeper than expected. The Commerce Department reported that retail sales rose 0.4% in April, missing the estimate for an increase of 0.8%.
Gold prices traded below key levels due to the rebound in the dollar and Treasury yields caused by uncertainty over the US debt ceiling. Weak economic data from China pressured the demand for gold. While policymakers are expected to continue discussions over raising the U.S. debt ceiling, renewed fears of a hawkish Federal Reserve hurt consumer expectations.
Oil prices failed to push higher as concerns over demand persisted due to a surprise increase in US crude inventories and weaker economic data from the US and China. The uncertainty surrounding talks on raising the U.S. debt ceiling and the possibility of expanding sanctions on Russia by the G7 However, Russia's exports hit their highest level with India and China as its major importers, bypassing any sanctions imposed.
The offshore yuan fell below the key 7 level against the US dollar for the first time this year as weak economic readings cast doubt over China's recovery. While the 7 level is largely arbitrary, it holds psychological importance for China, preventing the currency from crossing the threshold. The recent drop in the yuan comes after a series of weak economic readings and the People's Bank of China's decision to fix the daily dollar-yuan rate at a substantially weaker level.