European and Asian stocks fell on Wednesday, as traders turned their attention back to economic data, while the US House of Representatives prepared to vote on the debt ceiling bill.
Europe’s region-wide Stoxx 600 was down 0.3 per cent, Germany’s Dax lost 0.4 per cent, France’s Cac 40 was 0.6 per cent lower and London’s FTSE 100 slipped 0.3 per cent in early morning trade.
The region’s markets were led lower by Asia, where China’s CSI 300 index fell 1 per cent after the Chinese statistics bureau reported a contraction in manufacturing activity in May, defying analysts who had expected an expansion.
Hong Kong’s Hang Seng China Enterprises index dropped 2 per cent, bringing the benchmark more than 20 per cent lower from its recent peak in January and into bear market territory.
Preliminary data in France showed that the country’s annual consumer price inflation slowed to 6 per cent in May, its lowest level for a year, down from 6.9 per cent in the previous month.
The reading also fell below the 6.4 per cent forecast by economists polled by Reuters, raising hopes that the European Central Bank is nearing the end of its tightening cycle as price pressures ease quickly across the eurozone.
Germany and Italy are set to post their inflation results later in the day, with the eurozone figures coming out on Thursday.
Meanwhile, contracts tracking Wall Street’s benchmark S&P 500 slipped 0.3 and those tracking the tech-heavy Nasdaq 100 fell 0.4 per cent ahead of the New York open.
The moves follow choppy trading in the previous session, as traders worried whether Congress would manage to pass the US debt ceiling deal before the government runs out of money in early June.
The bipartisan bill, agreed on Saturday, would raise the country’s $31.4tn debt ceiling for two years, but it first needs to pass both chambers of Congress, with traders poised for the vote in the House of Representatives later on Wednesday.
The yield on US Treasury bills that mature next month — at about the date the government could run out of money — edged up to 5.4 per cent, but remained well below last week’s peak. Bond yields rise as prices fall.
The pressure on longer-term Treasuries eased, with the yield on policy-sensitive two-year bills falling 0.04 percentage points to 4.43 per cent. The yield on the benchmark 10-year note was down 0.034 percentage points to 3.66 per cent.
“The bulk of the risk of the debt ceiling issue is off the table, the market is paralysed, it seems, until the issue is legally concluded,” said Mike Zigmont, head of research and trading at Harvest Volatility.
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