A look ahead to the European and global markets by Kevin Buckland.
Politics is in the spotlight at the start of a new week, which falls mainly – still – on the US debt ceiling.
Talks between President Joe Biden and lawmakers appear set to resume Tuesday after being postponed Friday.
Despite that setback and deep partisan divisions, both Biden and analysts say there are signs of progress. Biden is confident enough that he still plans to board a flight Wednesday to Hiroshima for the G7 summit.
Investors, however, want to clearly see the ink on the paper. Equity markets weakened across most of Asia on Monday, with the notable exception of Japan, after the U.S. budget office backed the idea that Treasury funds will run out early next month .
Currency markets, however, were paying more attention to the surprising results of regional elections in Thailand and Turkey.
Turkish President Tayyip Erdogan defied pollsters and kept alive his hopes of extending a two-decade rule by forcing a runoff after leading Sunday’s vote. The lira fell to its lowest level since March, when it reeled from devastating earthquakes.
Meanwhile, the baht soared after Thai opposition parties crushed military-backed parties at the weekend, signaling broad and strong discontent with the ruling junta.
However, the liberal Move Forward party and the populist Pheu Thai Party will not only have to negotiate a deal with each other, they will also have to somehow win the support of the junta-appointed senate to form a government.
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The yuan hit a new two-month low amid worrying signs from data last week that the best part of China’s COVID-19 recovery is behind it. Tuesday’s retail sales will be the next test of slack consumer demand, following the shock results of import and inflation figures.
The People’s Bank of China is controlling the fire for now, opting to leave rates unchanged on Monday.
China may have its economic problems, but it’s still flexing its geopolitical muscle, sending its top envoy on a tour of Ukraine, Russia and elsewhere in Europe starting today to discuss a “political settlement” to the crisis of Ukraine
Key developments that could influence markets on Monday:
Eurogroup meeting in Brussels
Eurozone industrial production data for March
New York Fed May Manufacturing Survey
Fed speakers, including Raphael Bostic, at the Atlanta Fed conference
Reporting by Kevin Buckland; Editing by Jacqueline Wong
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