Stocks mixed amid debt ceiling uncertainty

Global shares displayed a mixed performance as concerns regarding the economic outlook in China and other regions weighed on investor sentiment. In European markets, France’s CAC 40 declined by 0.4%, Germany’s DAX rose by 0.3%, and Britain’s FTSE 100 slipped by 0.2%. Futures for the Dow Jones Industrial Average were up by 0.2%, while futures for the S&P 500 climbed by 0.5%.

During Asian trading, Japan’s Nikkei 225 increased by 0.3%, and South Korea’s Kospi recorded a notable jump of 1.0%. However, Australia’s S&P/ASX 200 edged down by 0.1%. Hong Kong’s Hang Seng gained 0.2%, while the Shanghai Composite saw a marginal increase of less than 0.1%.

Investors remain wary of a potential “second wave” of COVID-19 cases in China, even though the economic impact is expected to be less severe than during the earlier phase of the pandemic. Concerns about China’s economic recovery, which has shown signs of faltering in recent years, further contribute to the cautious sentiment in the region.

The agreement reached between President Joe Biden and House Speaker Kevin McCarthy to raise the U.S. national debt ceiling helped buoy global shares on Monday. Efforts are now underway to gather the necessary votes for congressional approval and avoid a potential default.

Apart from the debt ceiling issue, investors are also monitoring inflation data closely. A key inflation measure surpassed economists’ expectations in April, adding complexity to the Federal Reserve’s fight against rising prices. The central bank, which has been aggressively raising interest rates since 2022, recently signalled that it might forgo a rate hike at its mid-June meeting.

Market participants are eagerly awaiting the release of U.S. consumer confidence data later on Tuesday. In commodity markets, U.S. benchmark crude declined by $1.50 to $71.17 a barrel, while Brent crude, the international standard, dropped by $1.66 to $75.44 per barrel. The U.S. dollar slightly weakened against the Japanese yen, trading at 140.17 yen, and the euro edged up to $1.0725 from $1.0711.