Opening Call: The Australian share market is to open higher.
U.S. stocks closed lower after talks to raise the debt ceiling stalled in Washington. The WSJ Dollar Index declined, which helped gold to settle higher. Treasury yields rose as sentiment shifted toward a more hawkish view of future interest rates. Crude-oil prices settled lower.
Australia’s S&P/ASX 200 closed 0.6% higher on strength in financial stocks, salvaging a second-straight weekly gain. The ASX 200 added 0.3% for the week.
Fear crept onto Wall Street after talks to raise the debt ceiling sputtered in Washington, bringing a week of steady trading to a tense conclusion. The stalled discussions fueled worries that failure to reach a deal could spark an unprecedented financial crisis as soon as early June. Stocks fell as investors second-guessed optimism about the negotiations that had built earlier in the week. Further darkening the outlook were comments from Fed Chair Jerome Powell that cast doubt on whether the central bank will raise interest rates again next month. Powell said that a slowdown in bank lending could cool the economy and inflation.
The Dow Jones Industrial Average fell 0.3%, the S&P 500 lost 0.1%, and the Nasdaq Composite Index declined 0.2%. All three indexes rose for the week, led by the Nasdaq’s 3% gain. Despite longstanding fears of an approaching recession, markets have proven resilient for much of the past two months. A steady stream of data showing low unemployment, firm consumer spending and solid corporate earnings reports has helped preserve the momentum. Still, the calm trading in the face of looming hazards left some investors in an eerie mood heading into the weekend.
Gold futures finished higher after a three-session decline attributed in part to strength in the U.S. dollar, pulling prices for the precious metal to their lowest in more than seven weeks. June gold gained 1.1% to settle at $1,981.60 per ounce on Comex, with prices for the most-active contract down 1.9% for the week. That was the biggest weekly percentage loss since the week ended Feb. 3, according to Dow Jones Market Data.
Prices moved higher following remarks from Fed Chair Powell, who said that his colleagues think it will take time to bring inflation back to the Fed’s 2% target. He also said the level of interest rates is now high enough to be “restrictive” or slowing growth, but confirmed that the central bank has not already decided what to do in June.
Oil settled a bit lower, but with prices for U.S. and global benchmark crude posting their first weekly gain in five weeks. West Texas Intermediate crude for June delivery declined by 0.4% to $71.55 per barrel on the New York Mercantile Exchange. Prices rose 2.2% for the week. July Brent crude, the global benchmark, also lost 0.4%, to setle at $75.58 per barrel on ICE Futures Europe, and posted a weekly climb of 1.9%.
Crude prices were having a great week as lawmakers seemed likely to reach a deal on the debt ceiling, said Edward Moya, senior market analyst at Oanda, in a market update, but “optimism quickly disappeared on Friday and that sent oil prices sharply lower.”
The dollar index, which dropped to 103.00, has recovered to 103.20, but still remains in negative territory, netting a loss of nearly 0.4%. Against the Euro, the dollar has weakened to 1.0809 from 1.0771. The dollar is weak against Pound Sterling at 1.2446, easing from 1.2410.
Against the Japanese currency, the dollar has dropped to 137.93 yen from 138.71 yen. The dollar is weak against the Aussie at 0.6649, and has eased against Swiss franc to CHF 0.8996. The Loonie is little changed against the dollar at 1.3504.
European stocks rose on Friday as investors monitored U.S. debt ceiling talks and reacted to a slew of regional data. The pan European STOXX 600 gained 0.7 percent to reach a one-year high. The German DAX climbed 0.7 percent to scale a new peak, while France’s CAC 40 added 0.6 percent and the U.K.’s FTSE 100 edged up 0.2 percent. European stocks may open on a firm note Monday despite the U.S. debt ceiling stalemate and renewed uncertainty about the Fed’s rate path.
In Asian trading, Japan’s Nikkei Stock Average ended 0.8% higher, its highest close since August 1990. Chinese shares ended mixed, extending a rangebound pattern as investors weighed China’s weak April economic data against optimism over possible easing by the PBOC. The Shanghai Composite Index ended 0.4% lower. The Shenzhen Composite Index edged up 0.1% and the ChiNext Price Index ended flat.