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Wall Street stocks rise as FTSE falls ahead of US debt deal vote

A look at how the major markets are performing on Tuesday

FTSE US President Joe Biden delivers remarks on a deal struck with House Speaker Kevin McCarthy to raise the national debt limit in the Roosevelt Room of the White House on May 28 in Washington DC. Photo: Getty.
US president Joe Biden delivers remarks on a deal struck with House speaker Kevin McCarthy to raise the national debt limit in the Roosevelt Room of the White House on 28 May in Washington DC. The FTSE fell on Tuesday. Photo: Getty (Anna Rose Layden via Getty Images)

Wall Street opened higher on Tuesday, while the FTSE 100 and European stocks were mixed, as US president Joe Biden and Republican lawmakers reached a tentative agreement on a US debt-ceiling deal.

Congress is expected to vote on legislation to pass the deal on Wednesday, which needs both Republican and Democratic support to pass.

The Dow Jones (^DJI) rose 0.06% to 33,111.88 points, while the S&P 500 (^GSPC) gained 0.58% to 4,230.03 points. The tech-heavy NASDAQ (^IXIC) also opened higher, by 1.15% to 13,124.48.

FTSE 100 and European stocks

Across the pond, the FTSE 100 (^FTSE) fell 0.21% to 7,611.33 points, while the CAC 40 (^FCHI) in Paris lost 0.56% to 7,262.87 points. In Germany, the DAX (^GDAXI) gained 0.10% to 15,971.10 points.

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“The FTSE 100 dropped slightly at the open, also having been closed on Monday, with any debt ceiling progress having been noted but with any celebrations on hold until a done deal is announced,” Richard Hunter of Interactive Investor said.

“Some weakness in financial stocks dragged on the index, with some tentative buying of defensive stocks insufficient to stem the small decline. Even so, the index remains ahead by 2.1% in the year to date.”

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Meanwhile, British supermarket Asda has confirmed plans to acquire the petrol forecourts and convenience store operations in the UK and Ireland of its sister business EG Group in a deal worth around £2.3bn ($2.84bn).

The merger will allow the supermarket to expand further into convenience retail.

Both groups are owned by the billionaire Issa brothers and the private equity firm TDR Capital.

US and Asia markets

In the US, Wall Street opened in the green following Biden’s optimistic words on the debt deal vote at the weekend.

On Monday, Biden said he felt "very good" about the prospect of lawmakers passing the deal by the deadline on 5 June.

The centerpiece of the legislation is a cap on federal spending. It would hold spending flat for 2024 and impose new limits for 2025 without touching social security and medicare while boosting spending on the military by 3%.

The legislation would also increase work requirements in order to qualify for food assistance, an incentive for people to find jobs.

The S&P 500 and Nasdaq were also helped by semiconductor maker Nvidia (NVDA) gaining more than 4%, after its market cap touched $1tn, making the company the first chipmaker to hit such a valuation. Nvidia's stock hovered around $406 per share during the morning session.

Shares in the Mountain Valley Pipeline operator Equitrans Midstream (ETRN) also rose. It climbed by more than 40% after the tentative US debt ceiling deal included measures to accelerate the development of the pipeline.

In Asia, markets were mixed overnight. Tokyo’s Nikkei 225 (^N225) was up 0.30% to 31,328.16 points, while the Hang Seng (^HSI) in Hong Kong rose 0.04% to 18,557.78. In mainland China, the Shanghai Composite (000001.SS) was flat, down 0.02% to 3,221.32 points.

Pound

The pound (GBPUSD=X) was down against the US dollar by 0.05% to 1.23. Against the euro, sterling (GBPEUR=X) was up, by 0.09% to 1.15.

“It is clear that more interest rate hikes are coming. Markets are now pricing in more than four additional interest rate increases, and we do not rule out the possibility that the terminal rate will land above 6%. Our bullish view of sterling rests on this prospect, as well as the resiliency of UK domestic demand,” Matthew Ryan, head of market strategy at global financial services firm Ebury, said.

“Most signs point to only relatively modest growth in the UK this year, though this is far better than previously anticipated, and growth forecasts continue to be revised higher. This includes the IMF, which now no longer expects a UK recession in 2023."

Oil markets

Oil prices were mixed on Tuesday as traders awaited more clues from the US debt bill progress and China’s upcoming manufacturing PMIs.

Read more: Gold prices slide as dollar rises on Fed rate hike expectations

US crude oil, or West Texas Intermediate (CL=F), fell 0.32% to $72.44 a barrel, while Brent crude (BZ=F) gained 0.30% to $77.18 a barrel.

Economic data

Shop price inflation in the UK in May reached the highest level since records began in 2005, according to figures from the British Retail Consortium.

Supermarket and retail chain price inflation was 9% year-on-year, up from 8.8% in April. Meanwhile, food price inflation came down slightly, from 15.7% to 15.4%.

Investors will also be watching Chinese manufacturing data and Canadian GDP data on Wednesday, and euro area inflation figures for May on Thursday, which is likely to add pressure on the European Central Bank (ECB).

US jobs data, otherwise known as the non-farm payrolls report, is also due on Friday and is expected to show that the economy added 180,000 jobs in May. It will be one of the last pieces of data the Fed will have to digest before their next meeting.

Watch: President Biden, House speaker McCarthy reach tentative agreement on US debt ceiling

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