Market Update: European Stocks and US Dollar Fall

May 30, 2023
-SourceHUB

Market Update: European Stocks and Dollar Fall Amid Debt Deal Concerns

📉 European stocks and the U.S. dollar fell on Tuesday, following a two-month high, as relief over the U.S. government averting a possible default gave way to concerns about the deal’s path through Congress.

Key Highlights:

💰 Longer-dated U.S. Treasuries rallied as traders welcomed the deal to suspend Washington’s borrowing limit until January 2025, in exchange for spending caps and government program cuts.
💸 However, uncertainty about Congress’ approval of the deal, after opposition from some hard-right Republican lawmakers, caused the dollar and European stocks to slip.
🔒 Investors fear that the agreement, although initially seen as positive, could have negative consequences as it was a compromise.
💼 JB Were analysts predict up to $600 billion worth of bill issuance in the next six to eight weeks.
🌍 The size of the Treasury issuance and its economic implications are being carefully considered.
💡 The debt deal boosts market sentiment but puts pressure on growth due to government spending cuts and tighter liquidity conditions. It may have a dampening effect on inflation.
📉 The pan European STOXX 600 index fell 0.2% following its largest weekly decline in two months.
📈 U.S. futures were up 0.5%, indicating a positive start for U.S. stocks after the Memorial Day holiday.
📉 U.S. 10-year bond yields dropped 9.7 basis points to 3.72%, while 30-year yields fell 8 basis points to 3.89%.
💱 The dollar index fell 0.26% at 104.03 after rising to a two-month high, also trading near a six-month peak against the Chinese yuan.
📈 The yen rose 0.25% against the dollar to 140.08, bouncing back from a six-month low.
📈 The Nikkei stock index rose 0.4% as the U.S. debt deal and weaker yen boosted optimism.
🇨🇳 Hong Kong’s Hang Seng Index and CSI300 closed slightly higher after hitting November lows earlier, with cautious investor sentiment ahead of China’s May manufacturing data.
💼 Credit Suisse’s chief investment officer highlighted negative investor sentiment towards recent China equities performance.
🇪🇺 Eurozone bond yields fell after lower-than-expected Spanish inflation data, raising hopes of a less aggressive interest rate increase by the European Central Bank.
💰 The Turkish lira slipped further to a fresh record low following President Tayyip Erdogan’s election victory.

GBP/USD Eyes Additional Gains

📰 Economists at Scotiabank expect the GBP/USD pair to test the upper 1.24s as UK shop prices continue to surge.

GBP/USD Price Analysis: Bulls Move In to Take Control

📰 GBP/USD bulls are taking back control as the rally breaks the bearish trendline resistance.

GBP/USD Climbs to Fresh Daily High

📰 GBP/USD gains traction for the third straight day as hawkish BoE expectations underpin the GBP and USD demand remains subdued.

GBP/USD Outlook: Temporary Support Expected

📰 ING economists discuss EUR/GBP and GBP/USD outlooks, highlighting temporary support around the 1.2275/2300 area.

GBP/USD Subdued USD Demand

📰 GBP/USD attracts dip-buying as subdued USD demand and UK inflation figures support the British Pound.

Sources: Bloomberg, Reuters, FXStreet