Biden said congressional leaders with whom he met Tuesday "are confident that we can avoid a U.S. default. He believes that such a default would be "catastrophic for the American economy and the American people." "We are going to reach an agreement because there is no alternative but to do the right thing for the country", he said, adding that the negotiations were "in fact about the lines of the budget and not about the idea of whether or not to pay back our debts".

The three main US indices recovered more than 1% at yesterday's close, ending a series of lackluster sessions, as investors cheered these good news about the debt ceiling talks. President Joe Biden and congressional Republican leader Kevin McCarthy disagree on substance but have agreed to constructive discussions with small teams. This was immediately interpreted as a step towards resolving the crisis and is the kind of story the market wanted to hear.

The boost in confidence benefited the most leveraged issues, such as US regional banks, which rebounded sharply. The debt narrative also cheered up the dollar, which is at a seven-week high, and sent gold tumbling. Markets weren't even bothered by the small rally in US debt yields, which reflects a slight uptick in odds of a June Fed rate hike.

US stock futures were struggling for direction this morning after new data showed applications for US unemployment benefits fell by 22,000 to 242,000 in the week ended May 13 - the biggest decrease since 2021, according to the Labor Department. However, Bloomberg reports that many economists believe that this drop may not be significant since fraudulent claims could have caused a rise in claims in the previous week. "Massachusetts accounted for nearly half of the nationwide increase in unadjusted claims in the week through May 6, and state officials said it was mainly due to fraud".

Meanwhile, Federal Reserve Board of Governors member Philip Jefferson and Dallas Federal Reserve Bank President Lorie Logan are due to speak today. On the corporate side, we have a few earnings releases, including Walmart and Applied Materials. 

 

Economic highlights of the day:

In the United States, weekly jobless claims, the Philly Fed index and housing data are on the agenda.

The dollar is up 0.2% against the euro and the pound to EUR 0.9247 and GBP 0.8034. Gold is down to USD 1974. Oil is consolidating its recent gains, with North Sea Brent crude at USD 76.73 per barrel and US WTI light crude at USD 72.64. The yield on 10-year US debt is still climbing to 3.56%. Bitcoin is hovering around USD 27,000.

 

In corporate news:

  • Walmart raised its annual revenue and profit targets after better-than-expected first-quarter results, buoyed by demand for its cheaper products. The company was up about 2% in premarket trading.
  • Alibaba said Thursday that its fourth-quarter revenue rose 2%, below market expectations.
  • Cisco on Wednesday reported a 23% drop in new orders in the third quarter, sending its stock down 3.5% in pre-market trading.
  • Charles Schwab will issue $2.5 billion in long-term debt, the Wall Street Journal reported Wednesday, citing people close to the matter.
  • Micron Technology announced Wednesday that it plans to invest up to 500 billion yen in extreme ultraviolet technology over the next few years with support from the Japanese government.
  • Tesla has held discussions with Indian officials about incentives for car and battery manufacturers, a source with direct knowledge of the talks said, as the U.S. automaker once again considers entering the Indian market.
  • Amazon's cloud division will invest $13 billion in India by the end of the decade, doubling its past investments to meet growing demand.
  • Private equity firms TPG and Francisco Partners are preparing a joint bid of more than $5 billion to buy enterprise software company New Relic, a person close to the matter told Reuters on Wednesday.
Analyst recommendations:
  • 888 Holdings: Berenberg remains Buy with a price target reduced from 220 to 190 GBp.
  • Marks and Spencer: Citigroup downgrades from buy to neutral targeting GBp 170.
  • Mitchells & Butlers: Jefferies upgrades from hold to buy targeting GBp 270.
  • Rambus: Jefferies upgrades to buy from hold. PT up 21% to $65.
  • Snap-On: Roth MKM upgrades to buy from neutral. PT up 16% to $298.
  • The Gym Group: Jefferies remains Buy with a price target reduced from 220 to 180 GBp.
  • Visteon: Guggenheim Securities upgrades to buy from neutral. PT up 22% to $161.
  • WEC Energy: Mizuho Securities upgrades to buy from neutral. PT up 9.8% to $98.