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Wall Street and FTSE 100 lower ahead of key vote on US debt bill

A look at how the major markets are performing on Wednesday

Investors in the US digested economic data fro China and the impact it will have on the markets - and monitored updates on a US debt-ceiling deal. Photo: Getty.
Investors in the US digested economic data from China and the impact it will have on the markets – and monitored updates on a US debt-ceiling deal. Photo: Getty. (Matteo Colombo via Getty Images)

Wall Street, the FTSE 100 and European stocks were all lower on Wednesday as investors anticipate the outcome of a key vote on a US debt-ceiling deal – and digest the latest economic data from China, where manufacturing activity declined for a second straight month and at a faster rate than expected.

The Dow Jones (^DJI) fell 0.38% to 32,916.98 points, while the S&P 500 (^GSPC) dropped 0.41% to 4,188.36 points. The tech-heavy NASDAQ (^IXIC) also opened lower, by 0.28% to 12,980.95.

FTSE and European stocks

Across the pond, the FTSE 100 (^FTSE) fell 0.79% to 7,462.02 points just before the market closed, while the CAC 40 (^FCHI) in Paris lost 1.56% to 7,097.47 points. In Germany, the DAX (^GDAXI) further declined from earlier in the session, down 1.53% to 15,664.17 points.

FTSE stocks

Entain (ENT.L), owned by Ladbrokes, was at the bottom of the FTSE 100 index on Wednesday morning after the group said it was likely to incur a substantial financial penalty as part of an investigation by Britain's tax authority into issues including possible misconduct involving former third-party suppliers.

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B&M European Value Retail SA (BME.L) was top of the FTSE basket after the UK discount retailer forecast higher 2024 core earnings.

Bloomsbury Publishing (BMY.L) shares also got a boost after the company posted its "best ever" financial performance and said in the year to 28 February, sales rose 15% to £264.1m ($326.92) and profits before tax and highlighted items jumped 16% to £31.1m.

Meanwhile, WH Smith (SMWH.L) forecast higher full-year profit in a trading update, as the British retailer bet on strong travel demand during the summer after it witnessed robust trading across its global travel business.

Read more: UK mortgage costs set to jump amid further interest rate hikes

US and Asia markets

Wall Street opened in the red as the Biden administration moved to avoid a default with the debt-ceiling bill needing both Republican and Democratic support to pass later.

US bond yields weakened as investors fretted over the potential impact of the debt-limit deal and braced for the release of fresh jobs data. The yield on the benchmark 10-year Treasury dropped to 3.67%. The two-year note yield slipped to 4.4%, while that on the 30-year bond dropped to 3.89%.

The debt-ceiling agreement passed its first key test on Tuesday, when it gained approval from the Republican-led House Rules Committee despite opposition from hard-liners. That cleared the way for the deal to go before the House on Wednesday.

Read more: Stocks slide with all eyes on debt-ceiling vote: Stock market news today

In Asia, the key markets all closed in the red with Chinese markets leading declines as manufacturing activity shrank for a second straight month.

Chinese markets were also weighed by fears of worsening ties between Washington and Beijing, after China declined a US request for a meeting between defence ministers.

Tokyo’s Nikkei 225 (^N225) was down 1.41% to 30,887.88 points, while the Hang Seng (^HSI) in Hong Kong fell 2.47% to 18,137.13. In mainland China, the Shanghai Composite (000001.SS) also declined, down 0.63% to 3,204.02 points.

Read more: Asian stocks slide as China data disappoints, debt ceiling vote looms

Pound

The pound (GBPUSD=X) was down against the US dollar by 0.34% to 1.23. Against the euro, sterling (GBPEUR=X) was up, by 0.12% to 1.15.

Matthew Ryan, head of market strategy at global financial services firm Ebury, commented on how the ongoing uncertainty around the US debt ceiling is impacting the dollar amid the expectation of further Fed hikes with a 25bp rise expected at the July FOMC meeting and a two-in-three chance that we instead get one in June

“Currencies have been rather volatile so far this week, buffeted in both directions by news on the US debt ceiling, Federal Reserve rate expectations and major political news.

“The US dollar continued to march higher rallying to more than two month highs on the euro. The big news over the weekend was that the US government had agreed a bipartisan deal to temporarily suspend the country’s debt ceiling for a further two years, and thus avoid a potential default on 5th June. While this should be good news for risk appetite, and bearish for the safe-haven dollar, the greenback continued to rally at the beginning of the week," he said on Wednesday.

Oil markets

In commodities, oil prices were mixed on Wednesday as traders were awaiting more clues from the US debt bill progress and digested the latest manufacturing data from China – and considered how its weakening growth could hit crude demand.

US crude oil, or West Texas Intermediate (CL=F), fell 0.16% to $69.35 a barrel, while Brent crude (BZ=F) lost 0.27% to $73.34 a barrel.

Read more: FTSE 100: Ocado at risk, IMI in – how London Stock Exchange is set to reshuffle the index

Economic data

Data showed Chinese manufacturing activity contracted faster than expected this month on weakening demand, with the official manufacturing purchasing managers' index down to 48.2 against a forecast of 49.4.

Investors will also be keeping across 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: Market believes Congress will get debt deal passed: Strategist

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