Stock markets drop as investors await US inflation data, debt ceiling showdown

May 10, 2023 (MLN): Stock markets dropped Tuesday as investors awaited key US inflation data and tracked President Joe Biden's battle with Republicans over the debt ceiling, as APP reported. 

Wall Street indices finished moderately lower, while major European stocks closed flat or in negative territory. London stocks fell into the red as investors returned from a long holiday weekend marking the coronation of King Charles III.

Traders now await Wednesday's US inflation data that will shape the Federal Reserve's interest rate policy. A drop in the inflation reading in recent months has fanned hopes that the Fed will soon pause it's tightening campaign and potentially even begin cutting rates by the end of the year, with the banking crisis reinforcing that view.

"US inflation data... will play a key role in shaping the Fed's interest rate plans moving forward," said Nigel Green, head of the financial advisory firm deVere Group. After lifting borrowing costs last week, officials hinted at a possible hold at their June meeting. "We've finally reached the point at which the Federal Reserve may be at the end of its tightening cycle and we can start to look forward to when it can feasibly begin to ease policy in order to offset any shock to the economy," said Craig Erlam, senior market analyst at trading platform OANDA.

The Bank of England will also announce its latest monetary policy decision on Thursday, as analysts expect another hike with UK inflation holding stubbornly above 10%.

Meanwhile, traders are keeping tabs on Washington as Biden started talks Tuesday with Republican House Speaker Kevin McCarthy and other congressional leaders on raising the debt ceiling. There are worries that lawmakers will fail to reach a deal in time to increase the amount that the country can borrow to meet its repayment obligations, with right-wing Republicans determined to secure spending cuts.

Treasury Secretary Janet Yellen has warned the government could hit its limit by the start of June, adding that "financial and economic chaos would ensue" if a deal was not reached.

In Europe, real estate shares were dragged down by one of Sweden's biggest commercial landlords. There were signs of Sweden's property crisis worsening as SBB took a series of steps to save cash, including scrapping a planned share sale, and continued focus on selling assets. Its shares fell more than 24% on Tuesday, a day after the real estate group was downgraded to "junk" status by credit agency S&P.

Shares in Switzerland's biggest bank, UBS, also fell after it announced that Credit Suisse CEO Ulrich Koerner would join its leadership team when it completes the merger with its fallen domestic rival.

In New York, Boeing jumped 2.3% as it reached an agreement to sell as many as 300 planes to Ryanair over the next decade. Ryanair climbed 3.6% in Dublin.

Copyright Mettis Link News