US Stocks Drop On Debt Ceiling & Bank Concerns
The German Dax stock index has achieved a new record high. This is good news for the country's economy. Many companies listed on the index are performing well. Investors are optimistic about Germany's future. The Dax has been rising steadily over the past year. This trend may continue in the coming months. Overall, the German stock market is in good shape right now.
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US policymakers stopped talking about the debt ceiling deal. The stock market on Wall Street dropped. People were nervous about the health of US regional banks.
On Friday, investors bought short-term US Treasuries. They don't think the Federal Reserve will raise interest rates in June. Jay Powell is the chair of the Federal Reserve, and he warned that tight credit conditions at US banks may mean interest rates won't need to be raised as much to reach their 2% inflation target.
Republican lawmakers left talks to prevent a US default. This could cause a major national default.
In the morning, Wall Street made gains but they disappeared later on. The S&P 500 ended the day 0.1% lower on Friday, but got 1.7% higher for the whole week. The Nasdaq Composite, which is technology-focused, dropped 0.2% but got higher for four weeks in a row with a 3% rise.
After Powell spoke, investors only saw a 21% chance of Fed raising interest rates at the June meeting. This was shown in pricing in the futures market. Before this, it was around 40%.
The two-year Treasury notes' interest rate rose a bit to 4.27%. However, the rate kept changing between wins and losses. The 10-year note's interest rate rose by 0.03%, reaching 3.68%. When bond prices go down, bond yields go up.
CNN reported that Treasury Secretary Janet Yellen talked to bank CEOs. She suggested that more bank mergers might be needed. Because of this news, regional bank stocks in the United States went down. On Friday, the KBW Regional Banking index dropped by 2.2%.
Jack Ablin from Cresset Capital said that the Republicans walking out of the meeting was a big deal. He thinks that people were hopeful before, so this is a disappointment.
The US dollar went down 0.4% against other currencies. Meanwhile, the price of gold, which people usually buy during uncertain times, went up 0.9% to almost $2,000 per ounce.
The Dax in Germany went up by 0.7%, ending at a new high of 16,275. The Stoxx 600 in Europe also went up by 0.7%. The CAC 40 in France increased by 0.6%, continuing its gains from the previous day. However, the market slowed down later.
Claus Vistesen, the chief eurozone economist at Pantheon Macroeconomics, said that earnings in Europe, particularly in Germany, have been better despite the macroeconomic indicators.
In April, Germany's producer price index revealed a lower inflation rate of 4.1 percent. This is a decrease from March's rate of 6.7 percent. The reading slightly exceeded the predicted rate of economists surveyed by Reuters.
The Frankfurt index is up by 17% this year. This is due in part to the strong earnings of the industrial sector.
Germany couldn't make enough cars because they didn't have enough supplies. But, the problem with not having enough semiconductors has gotten better. This means they can now make more cars. Chris Hiorns is a fund manager at EdenTree and he talked about this.
Tech sector pessimism hindered the US stock market rally from spreading to Asia. As a result, Asian stocks experienced a decline.
Investors felt bad after Alibaba's weak third-quarter results. This led to a 1.4 per cent retreat in Hong Kong's Hang Seng index. China's benchmark CSI 300 stock also dropped by 0.3 per cent.
China's currency fell to 7.01 against the US dollar, the lowest it has been since December. The decrease came due to weak consumer spending and industrial production in April. Youth unemployment also reached a record high. These numbers indicate a weak economic recovery after the country's zero-Covid measures were lifted last year.
