Global equities and U.S. Treasury yields experienced a decline on Wednesday due to prevailing risk-off sentiment in the market. Investor attention was focused on an imminent vote in Congress regarding the U.S. debt ceiling, which generated anticipation and cautiousness.
The U.S. House of Representatives was scheduled to vote on a bipartisan agreement aimed at raising the existing $31.4 trillion ceiling, thereby preventing a potential government default. However, the bill’s path through the House could be challenging due to the slim majority held by Republicans, with uncertainty surrounding the number of House Democrats supporting the proposal.
Ryan Detrick, Chief Market Strategist at Carson Group, acknowledged the prevailing jitters, citing a slight chance of complications arising during the vote later that night. Detrick emphasized the normalcy of such apprehension until the final approval is granted by the President. Additionally, profit taking at the end of the month contributed to market dynamics.
The MSCI world equity index, tracking shares in 50 countries, experienced a 1.06% decline, while Europe’s primary share index, STOXX, dropped by 1.07%. On Wall Street, all three major indexes, particularly technology, financial, consumer discretionary, and industrial stocks, were lower. The Dow Jones Industrial Average fell 0.79% to 32,782.5, the S&P 500 lost 0.79% to 4,172.41, and the Nasdaq Composite decreased by 0.73% to 12,922.98.
In tandem with the risk-off sentiment, benchmark U.S. 10-year Treasury yields decreased to 3.696%.
The U.S. dollar witnessed an increase to a two-month high following data that revealed unexpected growth in job openings during April. This data suggested ongoing strength in the labor market, which could potentially prompt the Federal Reserve to consider raising interest rates in June. The dollar index rose by 0.577%, with the euro declining 0.86% to $1.0641.
Oil prices experienced a decline due to concerns over demand, prompted by weak economic data from China, a major importer. Brent crude futures for August delivery fell by 1.02% to $72.79 per barrel, while U.S. West Texas Intermediate crude (WTI) dropped 0.78% to $68.92 per barrel.
Despite the strength of the dollar, gold prices managed to strengthen slightly. However, due to optimism surrounding a potential U.S. debt deal, bullion was on track for its first monthly decline in three months. Spot gold increased by 0.4% to $1,966.09 per ounce, while U.S. gold futures gained 0.75% to $1,972.70 per ounce.
