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FTSE 100 closes higher as US stocks mixed amid debt ceiling uncertainty

A look at how the major markets are performing this Monday

FTSE President Joe Biden salutes as he boards Air Force One at Dover Air Force Base in Dover, Del., Monday, May 15, 2023. The Biden's are traveling to Philadelphia. (AP Photo/Patrick Semansky)
FTSE: Investors are hoping US president Joe Biden can reach a deal in the debt-ceiling standoff. Photo: Patrick Semansky/Reuters (ASSOCIATED PRESS)

The FTSE 100 and European stocks finished mixed this Monday, amid the risk of a default on the US national debt and persistent inflation in the Euro area.

The FTSE 100 (^FTSE) rose 0.25% to close at 7,773 points, while the CAC 40 (^FCHI) finished flat at 7,410 points. In Germany, the DAX (^GDAXI) finished near the flatline, at 15,908.

Markets on Wall Street were mixed despite hopes that there will be a resolution in debt ceiling negotiations between president Joe Biden and Republican congressmen.

Europe’s economy is expected to grow faster than previously expected over this year and next, but inflation will be higher than hoped too.

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The European Commission’s latest economic forecasts show that the economy “continues to show resilience in a challenging global context”.

The EU has increased its prediction for inflation across the eurozone as it warned of "persistent challenges".

Officials lifted their projections for consumer-price growth to 5.8% this year and 2.8% in 2024.

The upward estimate for price rises comes amid concerns about "core" inflation, which strips out volatile elements such as food.

FTSE

In London the FTSE 100 hit its highest level in almost a week, with mining companies and banks among the top risers.

The UK’s blue chip index was also driven by market optimism as hopes that the UK will avoid recession this year are rising, after the economy performed better than expected so far this year.

Forecasters at the EY Item Club have predicted that the UK will grow by 0.2% during 2023, rather than contracting as previously forecast.

Anna Anthony, UK financial services managing partner at EY, said: “We’re still on the path to economic recovery and many businesses and consumers — particularly the most vulnerable in society — continue to face significant cost of living pressures.

"This cannot be underestimated, and appropriate support must still be provided, but we are in a more optimistic place than we were a few months ago.The recession that many thought was inevitable is now likely to be avoided and energy prices have fallen, boosting consumer and business sentiment."

Currys' (CURY.L) share price rose by 4.1% after it raised its profit outlook for the last financial year.

Read more: UK economy grows in first quarter but shrinks in March

The electronics chain said it anticipated a pre-tax profit of between £110m ($137m) and £120m for the year to the end of April, having previously cut its profit guidance to around £104m.

Cost savings have boosted profits, with the firm previously saying it was on track to save £300m by 2023 to 2024 by making its supply chains and IT systems more efficient, and automating its back office.

Heading the other way were shares in Wood Group (WG.L) which fell 35% after Apollo Global Management (APO) revealed it does not intend to make an offer for FTSE 250 (^FTMC) engineering consultancy.

Outside the world of listed companies, Lingotto Investment Management appointed former chancellor George Osborne as its non-executive chairman.

The asset manager is owned by the Exor NV holding company of Italy's Agnelli industrial dynasty.

Victoria Scholar, head of investments at Interactive Investor, said: "European markets have opened higher with the FTSE 100 heading back towards resistance at 7,800 extending gains after the UK index finished Friday in the green driven by healthcare and energy stocks.

Read more: Trending tickers: HSBC | Wood Group | Currys | Asos

"Global politics take centre stage with an unclear election outcome so far in Turkey as president Erdogan attempts to cling to power. This is weighing on Turkey’s BIST 100 (XU100.IS) equity index.

"Zelensky is set to meet UK prime minister Sunak today as part of the Ukrainian president’s European tour in his second visit to London this year. Zelensky tweeted “The UK is a leader when it comes to expanding our capabilities on the ground and in the air. This cooperation will continue today. I will meet my friend Rishi. We will conduct substantive negotiations face-to-face and in delegations.”

"US debt ceiling talks are due to restart on Tuesday as the 1 June deadline looms. There are growing hopes that the Democrats and Republicans will reach a deal to avert the disastrous scenario of a government default."

US and Asia

Wall Street was mixed on Monday as investors hoped that lawmakers can reach a deal in the debt-ceiling standoff.

The Dow Jones (^DJI) was flat at 33,299 points. The S&P 500 (^GSPC) rose 0.1% to 4,127 points and the tech-heavy NASDAQ (^IXIC) rose 0.37% to 12,330.

The ticking bomb of a potential debt default by the US government is front and centre for investors again this week. President Joe Biden, house speaker Kevin McCarthy and other congressional leaders are planning to meet on Tuesday to resume budget negotiations after postponing talks set for Friday.

Meanwhile, treasury secretary Janet Yellen said the discussions are making progress, The Wall Street Journal reported. She plans to meet senior bankers to discuss the debt limit.

Asian stocks were cautiously higher on Monday as investors braced for the release of China's industrial and retail data.

Read more: Gold price down as traders consider impact of US inflation data

Tokyo’s Nikkei 225 (^N225) gained 0.81% to 29,626 points, while the Hang Seng (^HSI) in Hong Kong rose 1.76% to 19,972. The Shanghai Composite (000001.SS) climbed 1.11% to 3,308 points.

China is due to report monthly industrial production, retail sales and fixed asset investment data on Tuesday.

Pound

The pound’s (GBPUSD=X) rally against the dollar once again gained momentum, with sterling trading at $1.2478.

Several reasons could be behind the dollar's recent strength, including concerns about US inflation, and fears about the debt ceiling standoff and global economic growth driving safe-haven buying.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "The pound has fallen back to $1.24 against the dollar, although it has strengthened very slightly. Investors appear to have run back into the greenback’s safe-haven arms as sentiment has been knocked about global growth prospects."

Sterling (GBPEUR=X) also gained ground against the euro to trade at €1.1480.

Oil markets

Meanwhile, Brent crude (BZ=F) gained ground and was trading at around $75 per barrel even as concerns over the US economy and China’s slower-than-expected recovery weighed on the outlook.

"Oil prices are still under pressure on sluggish demand outlooks as China’s economic reopening progress seems bumpy," CMC Markets analyst Tina Teng said.

Watch: Debt ceiling talks drag on as 'a recession is expected if we default'

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