Global equities, US yields fall ahead of debt ceiling vote

4:43 pm Wednesday, May 31st, 2023

By Chibuike Oguh

NEW YORK (Reuters) -Global equities and U.S. Treasury yields were lower on Wednesday as risk-off sentiment dominated markets, with investors focused on a much-anticipated vote in Congress on raising the U.S. debt ceiling.

The U.S. House of Representatives is set to vote on Wednesday on a bipartisan deal that would lift the $31.4 trillion ceiling and allow the government to avert a default. The bill faces a potentially tricky path through the House, where Republicans hold a slim majority. It is unclear how many House Democrats will back it.

“The jitters are expected as there is a very small chance there could be an issue with the vote later tonight,” said Ryan Detrick, chief market strategist at Carson Group.

“We don’t anticipate that, but until the final paper is signed on the president’s desk some apprehension isn’t abnormal,” Detrick said, adding that month-end profit-taking was also underway.

The MSCI world equity index, which tracks shares in 50 countries, lost 0.82%. European’s main share index shed 1.07%.

On Wall Street, all three main indexes closed lower, driven by a sell off in technology, financial, consumer discretionary and industrial stocks. The Dow Jones Industrial Average fell 0.41% to 32,908.27, the S&P 500 lost 0.61% to 4,179.83 and the Nasdaq Composite dropped 0.63% to 12,935.29.

U.S. Treasury yields moved lower following data showing an unexpected rise in job openings and comments by Federal Reserve officials, including vice chair nominee Philip Jefferson, about possibly skipping a rate hike at its next meeting. Benchmark 10-year note yields slipped to 3.6407%.

The dollar, which had earlier risen to a more than a two-month high, retreated after the comments by Fed officials. The dollar index rose 0.163%, with the euro down 0.44% to $1.0686.

Oil prices fell amid demand concerns following weak economic data from top importer China. Brent crude futures for August delivery settled down $1.11 to $72.60 a barrel, while U.S. West Texas Intermediate crude (WTI) settled down $1.37, or 2%, to $68.09.

Gold prices firmed despite the dollar’s strength, though optimism about the U.S. debt deal kept bullion on course for a first monthly dip in three.

Spot gold added 0.2% to $1,963.00 an ounce, while U.S. gold futures gained 0.29% to $1,963.70 an ounce.

(Reporting by Chibuike Oguh in New York; editing by John Stonestreet, Will Dunham and Emelia Sithole-Matarise)