May 15, 2023 (MLN): Amidst talks to raise the US debt limit and avoid a potentially disastrous default, Asian markets mostly experienced a downward trend on Monday, as APP reported.
While progress has been made in reaching a deal, the political deadlock between Democrats and Republicans continues to create uncertainty.
President Joe Biden expressed confidence in raising the debt ceiling, but Republicans are demanding budget cuts as a condition, while the White House maintains that the nation's credit should not be subject to negotiation, it added.
The ongoing impasse has led to a cautious outlook among traders, with concerns that the threat of default is weighing on market sentiment. The Congressional Budget Office warned of a "significant risk" of default by June 15 if an agreement is not reached.
Deputy Treasury Secretary Wally Adeyemo stressed the catastrophic consequences of a default, emphasizing that the United States has never defaulted on its debt and must avoid doing so.
The uncertainty surrounding the debt limit talks had a negative impact on Wall Street, with all three main indexes closing in the red on Friday. This downward trend spilled over to Asian markets, with Hong Kong, Shanghai, Sydney, Seoul, Singapore, Taipei, Manila, and Wellington all experiencing declines. Tokyo and Jakarta were the exceptions, as they saw slight gains.
Stephen Innes of SPI Asset Management noted parallels between the current political environment and the 2011 debt ceiling standoff, which caused a 17% drop in the S&P 500 index. Audrey Goh of Standard Chartered Wealth Management Group expressed a gloomy outlook for equities, citing ongoing risks in the market, including the debt ceiling talks and elevated inflation.
In currency markets, the Thai baht reached a five-week high as pro-democracy parties appeared poised to win weekend general elections, signaling a rejection of nearly a decade of the military-backed government.
The Turkish lira also saw a slight uptick as the country prepared for a presidential election runoff, with President Recep Tayyip Erdogan set to face opposition candidate Kemal Kilicdaroglu in a second round on May 28 if neither candidate secures the necessary 50% majority, it said.
However, the market response to these developments remains uncertain, with Ogeday Topcular of RAM Capital SA highlighting the lack of clarity that will persist over the next two weeks in Turkey, potentially leading to market volatility.
Copyright Mettis Link News
Posted on: 2023-05-15T10:43:43+05:00
