Tensions around the negotiations of whether to raise the debt-ceiling added to trader sentiment on Monday with US President Joe Biden and Republican Leader Kevin McCarthy set to meet on Monday night.
United States
Tensions around the negotiations of whether to raise the debt-ceiling added to trader sentiment on Monday. Standard Chartered’s economist, Sarah Hewin commented, “There is a lot of showmanship around the debt ceiling,” further adding, “The closer we get to June 1 without a resolution, the greater the risk of an accident, so there is a lot of potential for markets to get concerned.”
Federal Reserve Bank of St. Louis President James Bullard, who is a non-voting member this year, said they see the potential for further rate increases this year, stating “I’m thinking two more moves this year – exactly where those would be this year I don’t know – but I’ve often advocated sooner rather than later.” Meanwhile, Minneapolis Fed President Neel Kashkari who is a voting member this year added to hawkish comments, noting “If we were to skip in June that does not mean we’re done with our tightening cycle, it means to me we’re getting more information. Do we then start raising again in July, potentially?”. Aside from ongoing headlines around the debt ceiling, the outlook for economic growth will be in focus on Tuesday with the release of PMI reports for May, expected to show manufacturing remains modestly expansive with services rising.
The S&P 500 was little changed on Monday, edging just 0.02% higher Communications was the top performer, jumping 1.17%, followed by real estate rising 0.67% and financials edging up 0.22%. Consumer staples, materials and energy were the biggest underperformers declining by -1.47%, -0.55% and -0.39% respectively. The Dow declined by -0.42%, the Nasdaq gained 0.50% while the Russell 2000 Index was up by 1.22 with the VIX Index climbed up by 2.38% to 17.21.
In corporate news, Apple achieved a historic threshold of $3 trillion market valuation, with shares soaring 35%. The share price of Pfizer rose by 5.38% to $38.75 on a report that it’s weight loss pill would be as effective as Ozempic. Zoom Video Communications Inc. rose by 2.94% to $71.41 on improved sales forecast while chipmaker Micron declined -2.8% after China said the company’s products failed a security review, although Micron is less dependent on China than its competitors.
Europe
In Europe, equities were muted as debt ceiling negotiations continue, the Euro STOXX 600 Index edged 0.04% higher at the end of trading on Monday. Six out of the eleven sectors closed in the green, with consumer discretionary up 0.47%, real estate firming 0.45% and healthcare rising up by 0.26%. Energy, consumer staples and materials were the biggest laggards declining by -0.42%, -0.33% and -0.23% respectively. Meanwhile the CAC fell by -0.18%, the DAX declined -0.32% and the FTSE was down by -0.76%. Economic data for the Eurozone revealed that consumers were less optimistic about their current and future economic status with the initial reading of consumer confidence for May remaining little changed at -17.4 versus expectations of an improvement to -16.8.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
Australia
The ASX 200 is expected to open slightly higher on Tuesday, with ASX futures up 5 points or +0.07% to 7,288. The Index closed -0.22% lower on Monday at 7263.3, with 72% of the index closing in the red. Debt ceiling negotiations weighed in heavily on investors, with ANZ Chief Economist writing to investors, “We believe a default is unlikely, but the economic impact of not reaching an agreement would be severe.” Real estate was down by -0.74%, communications lost -0.63% while financials fell by -0.57%. Information technology was the star performer jumping 1.54%, energy was up by 1.0% while healthcare firmed 0.54%. The biggest winner of the index was Brainchip Holdings, gaining 8.51%, while Syrah Resources dropped -4.59%. Shares in takeover target Tyro Payments slumped -16.61% after bidder Potentia walked away from takeover discussions after having initial bids of $1.27 and US$1.60 rejected.
Commodities
In commodities, the price of oil rose with WTI and Brent crude adding 0.61% and 0.54% to $72.05 and $75.93 respectively. Spot gold was modestly lower by -0.3% at $1,971.91 with spot silver also -0.94% weaker at US$23.63. The prices of industrials metals were mixed with copper declining -1.30% to $367 with iron ore futures in Singapore also -3.07% lower at US$102.14. while SFX SGX Iron Ore sank -1.36% to $105.38.
Economic Calendar
23rd May 2023
Australian PMI (MoM May) 09:00
Eurozone PMI (MoM May) 18:00
US PMI (MoM May) 23:45
US New Home Sales (MoM Apr) 00:00
This article was written by James Woods, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3632.
