The last minute’s here. Wall Street banks are expressing concern about the potential impact on the market due to the ongoing standoff over raising the U.S. debt ceiling, despite stocks continuing to rise. While equity investors remain confident that lawmakers will reach a deal before the June 1 deadline, some strategists caution that stocks could become volatile in the days leading up to the deadline, given high valuations and the Fed official's comment on a further hike. Although surveys indicate a majority believe a deal will be reached, analysts highlight that the current economic backdrop may leave stocks more vulnerable than during the 2011 debt ceiling crisis, with the potential for significantly higher market instability if a resolution is delayed. Currently, the VIX stands relatively low at 17.20.
EQUITY
Wall Street closed mixed on Monday as the Nasdaq gained, supported by big tech, while the S&P 500 remained flat on the U.S. debt ceiling bill. Fed President James Bullard's comments about further interest rate hikes boosted the U.S. dollar. Regional banking stocks surged on PacWest Bancorp's loan portfolio sale, while larger lenders had subdued performances.
GOLD
Gold prices declined as negotiations to raise the U.S. spending limit took centre stage, diminishing safe-haven demand. The strength of the dollar and expectations of higher U.S. interest rates weighed on metal prices, affecting prices on most commodities.
OIL
China's economic rebound has shown signs of slowing, leading to a decline in oil imports in April. Despite this, both OPEC and the International Energy Agency continue to forecast strong Chinese demand for oil in 2023 and a significant global supply deficit in the second half of the year. Crude prices stay muted and are supported by high gasoline demand.
CURRENCY
Most Asian currencies remained flat or declined as markets awaited updates on US debt ceiling negotiations. The Chinese yuan fell to a six-month low against the dollar due to economic uncertainty. The US dollar advanced slightly as speculation of another interest rate hike boosted demand, while 79% of market participants expect a pause in the June meeting.