Markets on edge as US debt ceiling talks approach crunch time

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Key Points

U.S. President Joe Biden and House Republican Speaker Kevin McCarthy will meet to discuss the debt ceiling on Monday, less than two weeks before the June 1 deadline after which Treasury expects the federal government will struggle to pay its debts...

Asian stocks and Wall Street futures slipped on Monday as U.S. debt ceiling negotiations approached crunch time after stalling last week, while lingering banking fears and fresh geopolitical worries capped sentiment..

On Friday, reports that debt ceiling negotiations had reached an impasse rattled markets even as Federal Reserve Chairman Jerome Powell said U.S. interest rates might not need to rise as much given the tighter credit conditions from the banking crisis..

Futures are again pricing in an about a 90% chance that the Fed would keep rates unchanged at its next meeting in June, and a total of almost 50 basis points of cuts by the end of the year.Meanwhile, regional U.S. bank shares continued to fall on Friday, as Treasury Secretary Janet Yellen reportedly warned that more mergers may be necessary after a series of bank failures...

Later in the week, the Fed will release minutes of the May meeting on Wednesday while U.S. personal consumption expenditures (PCE) inflation data is due out on Friday.In the Treasuries market, debt ceiling concerns have created large distortions in the short-end of the yield curve as investors avoid bills that come due when the Treasury is at risk of running out of funds...

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