Debt ceiling talks continue. Australian labor market shows weakness

The US stock indices rose on Wednesday amid hopes that Congress will work out an agreement to raise the national debt ceiling, allowing the US to avoid defaulting on its obligations. At the close of the stock market yesterday, the Dow Jones Index (US30) gained 1.24%, the S&P 500 Index (US500) added 1.19%, and the Nasdaq Technology Index (US100) jumped by 1.28%. After yesterday's meeting, lawmakers expressed optimism that a default can be avoided. US President Biden will travel to Japan today for a meeting of G-7 world leaders, but he cut the rest of his trip to Asia while the debt ceiling problem persists.

Debt negotiation is just one issue that has investors worried. Concerns are also high about a possible recession, which could well start later this year because of much higher interest rates. One of the main positives that has kept the economy out of recession so far has been steady spending by US households. They have continued to spend even as manufacturing, the US banking system, and other parts of the economy collapsed under the pressure of high-interest rates.

Shares of Tesla Inc (TSLA) jumped more than 4% after yesterday's annual shareholder meeting, at which CEO Elon Musk said he intends to remain in office. It was also announced that the company will begin shipping its long-awaited Cybertruck later this year.

According to economic data, the number of new housing starts in the US in April was in line with expectations, but the numbers for March were revised downward.

Equity markets in Europe traded yesterday without a single dynamic. German DAX (DE30) gained 0.34%, French CAC 40 (FR40) decreased by 0.09% yesterday, Spanish IBEX 35 (ES35) added 0.22% on Wednesday, British FTSE 100 (UK100) closed negative by 0.32%.

The meeting of the G-7 countries will be held this weekend. It is noteworthy that China was not invited to the summit. The primary purpose of the meeting is to strengthen unity against challenges from Beijing and Moscow. All G7 countries – the United States, Japan, Germany, the United Kingdom, France, Canada, and Italy are closely linked economically with China, the world's second-largest economy and a key global manufacturing base and market. Countries are puzzling over how to alert China to what they see as a threat to global supply chains and economic security without alienating a powerful and important trading partner.

Asian markets were mostly down yesterday, except the Japanese Index. Japan's Nikkei 225 (JP225) gained 0.84%, China's FTSE China A50 (CHA50) lost 0.71% over the day, Hong Kong's Hang Seng (HK50) ended the day down by 2.09%, India's NIFTY 50 (IND50) was down by 0.57%, and Australia's S&P/ASX 200 (AU200) ended Wednesday down 0.37%. A larger-than-expected reduction in Japan's trade deficit helped Japan's Nikkei 225 Index (JP225) extend its winning streak for the sixth consecutive session.

Australia's labor market unexpectedly contracted in April, and unemployment rose amid some cooling economic activity. Total national employment fell by 4,300 in April to 13.9 million, with expectations of an increase of 25,000. As a result, the unemployment rate increased from 3.5% to 3.7%. The potential cooling in the labor market is also due to the fact that interest rates in Australia have reached a ten-year high. The Reserve Bank of Australia (RBA) has warned that employment is likely to fall further this year as rates remain high or possibly increase further. Weakness in the labor market also gives the RBA less room to raise rates further.

New Zealand on Thursday announced a budget deficit more significant than originally forecast as tax cuts, rising inflation, and a slowing economy hit the nation's treasury, forcing the government to minimize new spending and increase its bond program. New Zealand's finance minister announced billions to rebuild infrastructure after severe weather earlier this year and some new initiatives to help those struggling with increased spending.

S&P 500 (F) (US500) 4,158.77 +48.87 (+1.19%)

Dow Jones (US30)33,420.77 +408.63 (+1.24%)

DAX (DE40) 15,951.30 +53.37 (+0.34%)

FTSE 100 (UK100) 7,723.23 −27.85 (−0.36%)

USD Index 102.89 +0.33 +0.32%

• – New Zealand Producer Price Index (q/q) at 01:45 (GMT+3);
• – Japan Trade Balance (m/m) at 02:50 (GMT+3);
• – Australia Unemployment Rate (m/m) at 04:30 (GMT+3);
• – New Zealand Annual Budget Release at 05:00 (GMT+3);
• – UK Monetary Policy Report Hearings at 12:15 (GMT+3);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
• – US Philadelphia Fed Manufacturing Index (m/m) at 15:30 (GMT+3);
• – US Existing Home Sales (m/m) at 17:00 (GMT+3);
• – US Natural Gas Storage (w/w) at 17:30 (GMT+3).
• – Canada BoC Gov Macklem Speaks at 18:00 (GMT+3).

by JustMarkets, 2023.05.18

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.