SYDNEY: Asian stocks and Wall Street futures slipped on Monday as U.S. debt ceiling negotiations approached crunch time after stalling last week while lingering banking fears and fresh geopolitical worries capped sentiment.
U.S. President Joe Biden and House Republican Speaker Kevin McCarthy will meet to discuss the debt ceiling on Monday, less than two weeks before the June 1 deadline after which Treasury expects the federal government will struggle to pay its debts.
A failure to lift the debt ceiling would trigger a default, sparking chaos in financial markets and a spike in interest rates.
In early trade on Monday, S&P 500 futures lost 0.1 percent while Nasdaq futures were flat.
MSCI’s broadest index of Asia-Pacific shares outside Japan was last flat, struggling for direction. Japan’s Nikkei was also mostly unchanged and Australia’s resources-heavy shares slipped 0.2 percent.
South Korea bucked the sluggish trend, gaining 0.6 percent.
“In the art of brinkmanship, it feels that to get a deal we must see greater market volatility,” said Chris Weston, head of research at Pepperstone.
“While for much of last week, the headlines were that a deal is within reach, the breakdown in talks from Republican negotiators on Friday has many thinking that we could be pushed right to the June deadline before we see an agreement.”
On Friday, reports that debt ceiling negotiations had reached an impasse rattled markets even as Federal Reserve Chairman Jerome Powell said U.S. interest rates might not need to rise as much given the tighter credit conditions from the banking crisis.
The Fed chief also flagged that after a year of aggressive rate increases, officials can afford to make “careful assessments” of the impact of rate hikes on the economic outlook, a stance that was viewed as dovish by markets.
That has knocked the dollar off a two-month top against a basket of major peers and was last at 103.06 on Monday, flat for the day.
Source: Reuters
