Stocks called down as US debt ceiling looms

(Alliance News) - Stocks in London were set to open lower on Wednesday, as investors nervously await a critical vote on the US debt ceiling deal.

IG says futures indicate the FTSE 100 to open down 17.5 points, or 0.2%, at 7,504.57 on Wednesday. The large-cap index closed down 105.13 points, or 1.4%, at 7,522.07 on Tuesday in the first day of trade following a long weekend in the UK.

In the US on Tuesday, Wall Street ended mixed, also having reopened after a three-day weekend. The Dow Jones Industrial Average closed down 0.2%, the S&P 500 flat, and the Nasdaq Composite up 0.3%.

A deal to raise the US debt ceiling passed its first major test in Congress on Tuesday, surviving a crucial procedural vote amid a conservative backlash that resurrected the threat of the country's first-ever default.

US political leaders scrambled to push through legislation to suspend the national debt limit and avert economic catastrophe as a growing conservative backlash threatened to sink the deal at its first major hurdle.

Congress has until Monday next week to green-light an agreement between Republicans and Democrats to allow more borrowing and ensure the country doesn't miss loan repayments and default for the first time in history.

The 99-page 'Fiscal Responsibility Act' - hammered out between Republican House Speaker Kevin McCarthy and Democratic President Joe Biden over the weekend - pares back federal spending and raises the debt ceiling until 2025.

It needs lawmakers' support at a crucial vote Wednesday in the House of Representatives, and cleared a preliminary hurdle Tuesday, as the Rules Committee prepared it for a floor debate.

In Tokyo on Wednesday, the Nikkei 225 index was down 1.6%. In Sydney, the S&P/ASX 200 closed down 1.4%.

In China, the Shanghai Composite was down 1.0%, while the Hang Seng index in Hong Kong was down 2.9%.

China's manufacturing activity shrank in May for the second successive month, official figures showed Wednesday, the latest sign that the country's economic recovery is losing steam.

The official manufacturing purchasing managers' index fell to 48.8 points this month, below the 50-point mark that separates expansion and contraction, according to the National Bureau of Statistics.

The figure followed an unexpected fall to 49.2 in April, which reversed three consecutive months of growth. May's reading was lower than the median estimate of 49.5 in a Bloomberg survey of economists.

The drop "indicates the economic recovery faces challenges", said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

Sterling was quoted at USD1.2388 early Wednesday, lower than USD1.2404 at the London equities close on Tuesday. The euro traded at USD1.0691, lower than USD1.072. Against the yen, the dollar was quoted at JPY139.39, down versus JPY139.74.

Gold was priced at USD1,962.11 an ounce early Wednesday, higher than USD1,960.99 on Tuesday. Brent oil was trading at USD73.48 a barrel early Wednesday, lower than USD74.30 late Tuesday.

In Wednesday's UK corporate calendar, there are full-year results from B&M European Value Retail, Tern, and Bloomsbury Publishing.

The economic calendar has US retail sales data at 1355 BST.

By Sophie Rose, Alliance News reporter

Comments and questions to [e-mail]

Copyright 2023 Alliance News Ltd. All Rights Reserved.