Global market weekly overview

May 28, 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 deal reached

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

Throughout this week, after several different meetings between negotiators, President Joe Biden and top congressional Republican Kevin McCarthy finally reached a tentative deal to suspend the federal government’s $31.4 trillion debt ceiling on Saturday evening, ending a months-long stalemate.

McCarthy tweeted “I just got off the phone with the president a bit ago. After he wasted time and refused to negotiate for months, we’ve come to an agreement in principle that is worthy of the American people.”

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, U.S. Treasury Secretary Janet Yellen had 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.

Later on, during this week, Yellen confirmed that the U.S. would run out of money to pay its bills by the 5th of June.

Hot U.S. inflation data, more interest rate hikes?

The U.S. personal consumption expenditure (PCE) for the month of April 2023 came hotter than expected, at 4.4% YoY, compared to 4.2% YoY in March.

This is a 0.4% MoM increase, higher than the 0.2% MoM increase in the previous month.

Prior to this release, markets were pricing in no rate hike in the upcoming meeting.

However, after this data came, the CME FedWatch tool shows a 57.4% chance of a rate hike in the next meeting.

During the week, minutes of the last FOMC meeting were also released.

“Participants generally expressed uncertainty about how much more policy tightening may be appropriate,” the minutes said.

“Many participants focused on the need to retain optionality after this meeting.”

Majority of the participants reiterated that they will continue to monitor incoming data before reaching a decision, and this latest data might be it for another hike!

Notably, in the previous week, Powell stated that financial markets are pricing a different rate path than the Fed’s projections.

Earnings

Nvidia (NASDAQ: NVDA) reported its earnings for the first quarter of 2023, wherein the revenue clocked in at $7.19 billion [EPS: $1.09], which was a huge beat compared to the estimate of $6.51bn [EPS: 0.92].

Following the release, the stock price of Nvidia surged by more than 20% in the after-hours session.

The company is now ranked number 6th in the world, worth $940bn.

Notably, the stock price broke the all-time high set in Nov 2022 of $346, and closed at $389.46, a weekly surge of 24.57%.

Nvidia’s stock price is up 162% year-to-date.

Market performance

Since the markets close on Friday, these are before the U.S. debt ceiling deal was finally reached on Satuday, so the impact has not been reflected on this yet.

The U.S. stock market index S&P 500 (SPX) closed the week recording an increase of 0.32%  at $4205.44, while the technology index Nasdaq (NDX) went up significantly by 3.59% on the back of Nvidia’s earnings beat.

Nasdaq is at its highest level since March 2022.

The U.S. dollar index (DXY) marked the third consecutive weekly rise, closing the week by a rise of a significant 1%.

Spot gold closed at $1,946.13, marking a weekly decline of 1.58%.

Notably, this marks a 6.52% decline from the new all-time high it made three weeks ago, before experiencing a sharp sell-off.

Similarly, international spot silver closed the week at $23.3, marking a 2.26% weekly decline.

Meanwhile, Brent crude and West Texas Intermediate (WTI) both bounced off after finding some supporting ground last week, closing at a rise of 2.03% and 1.39% respectively for the week.

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