US debt ceiling bill passes House with broad bipartisan support

All three major US indices finished the mid-week session in the red after data showed the labour market remains resilient with job openings rising to 10 million. This reinforced bets the Fed could raise rates further this month. The Dow ended over 130 points lower while the S&P and the Nasdaq lost 0.6% each. Also, investors awaited the vote in the House on the debt ceiling deal later in the day after it was cleared Tuesday in the House Rules Committee with a 7-6 majority. For the month of May, the Nasdaq Composite gained 5.8% due to a rally in artificial intelligence-related shares. However, the Dow lost 3.5% and the S&P 500 inched up 0.25% last month as broader economic concerns weighed on the market. Meantime, European shares extended their decline on Wednesday afternoon, with the Euro Stoxx 50 index retreating 1.7% to its lowest level since the end of March. For the month, the Euro Stoxx 50 lost 1.8%. 

Summary for 01.06.2023 

• Asian equity markets mostly rose on Thursday as risk sentiment improved after the US House of Representatives passed the bill to raise the debt ceiling with broad bipartisan support. Investors also assessed a raft of manufacturing PMIs in Asia, headlined by a private survey showing Chinese manufacturing activity unexpectedly grew in May, in contrast to official data released just a day before. The S&P/ASX 200, Nikkei 225, Hang Seng and Shanghai Composite indices advanced, while the Kospi index declined. 
• European and US equities are seen headed for gains today as traders weigh progress on the US debt deal and comments from Fed officials. 
• Oil prices rose this morning, rebounding from near one-month lows as investors cheered progress towards averting a US debt default, while signs of life in Chinese manufacturing also brewed some optimism over a demand recovery in the country. 
• Overnight, the US House of Representatives passed the debt-limit legislation forged by President Joe Biden and Speaker Kevin McCarthy that would impose restraints on government spending through the 2024 election and avert a destabilising US default. Lawmakers from both parties joined to approve the bill 314-117 Wednesday evening, marking a rare moment of bipartisan accord in a bitterly divided Washington. The deal now heads to the Senate, where approval is virtually certain.  
• The Caixin China General Manufacturing PMI unexpectedly rose to 50.9 in May from 49.5 in the previous month. While beating market consensus, the latest result highlighted a patchy recovery in the economy amid insufficient demand and deflation risks.  
• The number of job vacancies in the United States unexpectedly increased by 358,000 to reach 10.1 million in April, surpassing market expectations of 9.375 million. This latest figure represented a rebound from the previous month’s near two-year low of 9.745 million and indicated a persistently tight labour market, which could potentially pave the way for additional interest rate hikes by the Federal Reserve. 
• Federal Reserve officials are signalling they plan to keep interest rates steady in June while retaining the option to hike further in coming months. Skipping an increase would give policymakers time to assess data but not preclude further tightening. The message was echoed by Philadelphia Fed President Patrick Harker, who also urged a June pause. That view undercuts the importance of the monthly jobs report, due tomorrow, which has often been viewed by Wall Street as a key data point swaying policy. 
• Germany’s consumer price inflation declined to 6.1% year-on-year in May, compared to 7.2% in the previous month and below market expectations of 6.5%, according to a preliminary estimate. It was the lowest rate since March 2022, partially due to slower increases in both energy and food prices. The EU-standard harmonised index of consumer prices, a measure used for cross-country comparisons, rose by 6.3% in May, marking the lowest level since February 2022. 
• American Airlines boosted its earnings per share forecast for the current quarter to a range of $1.45 to $1.65 from previous estimates of $1.20 to $1.40, citing improvement in unit revenue and “continued strength in the demand environment,” according to a filing with the Securities and Exchange Commission. The airline also hiked its margin expectations. It shares rose about 1%. 
• Hewlett-Packard Enterprise reported slightly higher-than-expected earnings per share but also lower-than-expected revenue. The company also lowered its forecast for the year. The servers and networking company’s shares were down nearly 7%. HP Inc also reported disappointing quarterly numbers, sending shares of the personal computer maker down nearly 6%.