“Wall Street Dips as China’s Weaker Figures and Debt Talks Worry Investors”

After a tentative start to the week, the mood was far more pessimistic on Tuesday. This is how it ended on Wall Street on the second trading day of the week:

• The Nasdaq fell 0.7 percent.
• The Dow Jones fell 0.2 percent.
• The S&P 500 fell 0.5 percent.

In the early hours of the morning, weaker-than-expected figures came from China, which immediately took a hit when trading in Europe opened a few hours later. All the leading indices ended the day in the red, with the exception of the Dax in Frankfurt, which barely managed an increase. On the Oslo Stock Exchange, the main index fell 0.89 per cent.

The interest rate on US government bonds with maturities of two and ten years is 4.02 per cent and 3.51 per cent respectively.

Conversations about the debt

In addition to the drop in inflation, the market has turned its attention to Washington DC, where politicians on both sides of the aisle continued negotiations around the much-discussed debt ceiling.

US Treasury Secretary Janet Yellen has stated several times in recent weeks that a solution must be put in place to avoid an “economic disaster”, as she described it on Monday. President Joe Biden and Republican Kevin McCarthy meet on Tuesday for new talks.

That the US is approaching default on its debt is nothing new, and it is also expected this time that the politicians will agree to raise the ceiling. Nevertheless, the high inflation, the banking crisis and the fear of a recession put another sting on the situation in 2023.

The meeting between Biden, McCarthy and other top politicians from both sides is to take place at 16.00 local time and the parties have warned that the meeting is simply a conversation about the way forward. According to several international media, no final agreement is expected.

Biden and the Democrats have been clear that raising the debt ceiling is non-negotiable and should come without conditions, while Republicans want an agreement to raise the debt ceiling to also involve cuts in public spending.

However, there is agreement on one thing: Neither party wants a short-term solution that only postpones a new debt situation until the end of September. McCarthy stated Tuesday that a long-term solution is what is desirable.

If the US were to end up in default, it would be the first time in history. The deadline is 1 June.

Does not rule out further interest rate hikes

On Wednesday, the stage is set for inflation figures from both the US and Norway for April. In the former country, an annual rate of five per cent is expected in the past month. Disney also presents quarterly figures on Wednesday evening Norwegian time.

Inflation in the US has fallen steadily since last summer, but is still well above the target of two percent. If the advance estimates are correct, total inflation in April will be at the same level as in March.

As is well known, the peak was reached in June last year, when the annual rate was 9.1 per cent.

Core inflation in the US is expected to be 5.4 per cent in April, only slightly down from the annual rate in March.

New York Fed President John Williams said at an event in the city on Tuesday that the central bank would not rule out more rate hikes.

– We have not said that we have finished raising interest rates. If it becomes appropriate to do it, it will be done, he said.

Williams emphasized that the underlying strength of the US economy and the risk of a credit crunch are some of the things that will be measured against each other at the next interest rate meeting in June.

As is well known, the US central bank raised the key interest rate to a range of 5.0 to 5.25 per cent last week, with central bank chief Jerome Powell stating that the monetary policy committee “will take decisions to a greater extent from meeting to meeting”.