May 21, 2023 (MLN): There were significant events and developments in the global financial markets, especially U.S., over the past week. Following is a summary of key highlights:

U.S. Debt-Ceiling Talks

The U.S. debt ceiling has remained the hot talk of the financial markets for the past few weeks.

The debt ceiling refers to a legislative restriction on the maximum amount of national debt that the U.S. Treasury is authorized to accumulate.

As of right now, the total U.S. debt stands at around $31.4 trillion, to put this into context, that is around $94,000 per American!

Earlier, the U.S. treasury Secretary Janet Yellen warned that the United States could run out of money to pay its bills by 1st June if Congress does not raise or suspend the debt limit.

In the last few weeks, the debt ceiling talks have become increasingly heated.

Throughout this week, no positive outcomes were reported from several different meetings.

The concerns surrounding a potential default have had a significant impact on the markets. The United States recently encountered the necessity of offering debt at historically high interest rates.

Recent development on the issue

U.S. President Joe Biden on Sunday said that he has done his part for debt talks with a proposal that cuts spending but emphasized that much of what Republicans have proposed is unacceptable.

Biden firmly stated that he will not agree to a proposal for a tax break for the oil industry.

Expressing his commitment to fiscal responsibility, Biden asserted, “I’m willing to cut spending,” but he also emphasized the need to examine tax revenues.

Biden acknowledged the possibility that Republicans might force a default through outrageous actions, even though he cannot guarantee otherwise.

In considering options, Biden revealed that he is exploring the application of the 14th Amendment of the Constitution to lift the debt ceiling, expressing his belief that he possesses the authority to employ the 14th Amendment in this matter.

The crucial question remains whether it could be utilized in time to prevent a default. 

U.S. Fed Powell: Inflation remains a serious problem

While speaking at a panel discussion on Friday, Federal Reserve Chairman Jerome Powell acknowledged that inflation is far above the Fed’s 2% target and poses significant hardship for the economy.

However, he said the Fed is strongly committed to returning to its goal and will adjust its policy as needed.

Powell stated it is possible that there will be more supply shocks that could push prices higher, but he added that it is hard to predict their timing and magnitude.

He added that interest rates may not need to rise as high as in previous cycles, given the lower level of credit stress in the economy due to recent banking crisis.

Notably, Powell states that financial markets are pricing a different rate path than the Fed’s projections.

Elaborating on the point that the recent data has shown that it will take time to lower inflation,, he expressed that Fed have not made any decisions whether rates are “sufficiently restrictive”.

Key data release

The number of Americans filing new claims for unemployment benefits fell more than expected last week, declining by 22,000 to 242,000.

The UK’s consumer confidence rose for the fourth consecutive month in May to the highest level since Russia’s invasion of Ukraine according to a survey by GfK.

The index for tracking consumers’ views on whether this is a good time for big purchases also increased by four points to -24. However, confidence did remain below zero, showing pessimism among consumers amid high inflation and geopolitical tensions.

Market performance

The U.S. stock market index S&P 500 (SPX) closed the week recording a jump of 1.65%  at $4191.99, while the technology index Nasdaq (NDX) went up significantly by 3.47%.

The U.S. dollar index (DXY) finally slowed down from its surge amid U.S. debt ceiling concerns, closing the week by a rise of 0.47%.

Spot gold closing at $1,977.3 marking a weekly decline of 1.67%.

Notably, this marks a 5% decline from the new all-time high it made a few days ago before experiencing a sharp sell-off.

On the other hand, international spot silver closed the week at $23.84, marking a 0.49% weekly decline. However, spot silver bounced back on the last day of the week by 1.58% to narrow the weekly decline to some extent.

Meanwhile, Brent crude and West Texas Intermediate (WTI) both found some supporting ground after falling for four consecutive weeks, closing at a rise by 2.26% and 2.58% respectively for the week.

These developments reflect the dynamic nature of the global financial markets and the potential impact on various sectors and economies worldwide.

Copyright Mettis Link News

Posted on: 2023-05-21T18:54:40+05:00