Global stocks fell on Tuesday as traders awaited crucial US inflation data and as President Joe Biden prepared to meet with congressional leaders to discuss a looming public debt crisis.
The Wall Street benchmark S&P 500 fell 0.4%, while the tech-heavy Nasdaq Composite fell 0.4% on a New York open.
The moves come as traders wait for the Bureau of Labor Statistics to release its latest gauge of US inflation on Wednesday. The report is expected to show consumer price inflation at an annual rate of 5% in April, unchanged from the previous month, according to economists polled by Bloomberg.
This is likely to affect the US Federal Reserve’s monetary policy path after it raised interest rates to a range of 5% to 5.25% last week, marking the tenth hike in 14 months.
US regional bank stocks continued to slide in the wake of the collapse of First Republic earlier this month and lingering concerns over the health of the sector. PacWest shares fell 4.9%, reversing a 3.6% gain in the prior session, while Western Alliance lost 4.2%.
“Uncertainty in the banking sector continues to tighten credit conditions and lending standards [which] could potentially push inflation much closer to target by December as unemployment rises,” said Jamie Dutta, market analyst at Vantage.
The Fed’s Quarterly Survey of Senior Loan Officers showed on Monday that US banks planned to raise their lending standards, adding to fears of a looming credit crunch for the world’s largest economy.
Meanwhile, Biden will meet with congressional leaders Tuesday afternoon in the wake of a political deadlock over raising the country’s $31.4 trillion loan limit or risk a historic default on U.S. debt and other government payments.
U.S. government bond prices surged, with the yield on interest-rate-sensitive two-year Treasuries falling 0.01 percentage point to 4%, following a sell-off on Friday. Yields move inversely to prices.
The US dollar index rose 0.4% against a basket of six other currencies.
Brent crude, the international oil benchmark, fell 1.05% to $76.20 a barrel.
In Europe, negative corporate news in the real estate sector dragged the regional Stoxx 600 down 0.7%. The French Cac 40 dropped by 1%.
Shares of Swedish owner SBB fell 16.2% after it halted dividend payments on Monday in response to S&P Global’s credit rating being downgraded to junk.
The real estate group’s move was driven “by the notion that weakness in the Swedish real estate sector is foreshadowing what’s to come in continental Europe,” said Simon Harvey, head of FX analysis at Monex Europe.
London’s FTSE 100 fell 0.3% as traders awaited the Bank of England’s next policy meeting on Thursday, when the central bank is expected to raise interest rates by 0.25 percentage point to 4.5%, the highest level since 2008.
Hong Kong’s benchmark Hang Seng index fell 2.1%, while China’s CSI 300 fell 0.9%. Japan’s Topix stood out against the rest of the region, gaining 1.3%.
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