© Reuters. FILE PHOTO: A man walks past an electronic board showing Japan’s Nikkei average and share prices outside a brokerage firm, in Tokyo, Japan, on March 17, 2023. REUTERS/Androniki Christodoulou
Written by Amanda Cooper
LONDON (Reuters) – Global stocks rose on Tuesday, while the dollar eased from a five-week high as US lawmakers prepared for another round of talks to resolve a deadlock over a government borrowing limit.
Dollar weakness supported crude and stocks, although investors were nervous about the crucial negotiations on the US government debt ceiling, with just over two weeks left before the government runs short of money to pay its bills.
Investors have dumped short-term US Treasury bonds that mature around the “X date” — the point at which the government runs out of money to pay its bills without increasing the borrowing limit.
Other than that, global markets show little sign of stress, at least for now.
Michael Brown, a strategist at TraderX, said he believes there will eventually be a deal, but the concessions Democrats led by President Joe Biden may have to make in order to strike a deal could come at a high cost to the US economy.
“What concerns me as far as the debt ceiling is concerned,” he said, “isn’t a ‘will it be raised, won’t it be brought up’ gestural stuff”.
“What’s going to happen next and what needs to happen to get something over the line, and once that’s done, whether the can has been kicked or whether there’s a longer agreement, I think that’s going to start investors thinking a little bit more,” he said.
The MSCI All-World Index rose 0.1%, while equities were flat in Europe and US index futures rose into positive territory.
There are signs that the global economy is starting to feel the crisis of rising interest rates and continuing inflation.
China saw industrial production rise in April, but far less than economists expected, while retail sales also fell short of expectations – highlighting the fragility of the post-COVID recovery. It fell 0.2% on the day against the dollar.
Against the yen, the dollar fell 0.23% to 135.78. The euro rose 0.2 percent to $1.0893.
Sluggish manufacturing data from New York state on Monday raised concerns about a slowing US economy that could help lower inflation, which will strengthen the Federal Reserve’s stance to halt interest rate hikes.
The benchmark 10-year note fell 3 basis points to 3.47% on Tuesday. Bill-of-the-month revenue hit another record above 5.8%.
In commodities, it rose 0.7% to $75.76 a barrel, while it rose 0.66% to $71.60.