MARKET WRAPS
Stocks:
European stocks traded mostly lower on Tuesday with investors still absorbed by budget wrangling in Washington.
The debt ceiling seems to be the only market driver, or at least until the "debt ceiling does us part," SPI Asset Management said.
Investors are "sitting on their hands and unwilling to commit" in the absence of a resolution to the debt ceiling standoff, Interactive Investor said.
Stocks to Watch
Luxury's best performers at 1Q were those able to show they are cashing in on a reopening Chinese market, while the laggards were those with greater exposure to less well-off consumers, Deutsche Bank said.
The quarter was marked by resurgent domestic demand in postpandemic China, as well as resilience in Europe, but a slowdown in the U.S. is a concern, Deutsche added.
The strongest performers, such as France's Hermes and LVMH, Cartier owner Richemont and Italian group Moncler, benefited from Chinese recovery and resonance with the affluent, while the weakest performers, such as Gucci owner Kering and Italy's Salvatore Ferragamo, were dogged by creative transition as well as a more aspirational base, Deutsche said.
Deutsche lifted its target price on Richemont to CHF180 and on Moncler to EUR75.
U.S. Markets:
Stock futures suggested a weaker start as a deal to raise the debt ceiling remains elusive.
Stocks to Watch
PacWest shares rose 9% before the bell, building on a 20% gain Monday. That came after the embattled bank said it would sell a $2.6 billion property-loan portfolio to Kennedy-Wilson Holdings.
Yelp's shares rose almost 14% in premarket trading after the Wall Street Journal reported that activist investor TCS Capital Management has built a stake in the company and is recommending a sale or merger.
Economic updates set for release include S&P flash services and manufacturing purchasing manager indices for May. Dallas Fed President Lorie Logan is expected to deliver some comments.
Follow WSJ markets coverage here
Forex:
The euro stayed weaker against the dollar after a key survey showed eurozone manufacturing activity contracted by more than forecast in May but services activity expanded more than expected.
The S&P's eurozone manufacturing purchasing managers' index fell to 44.6 in May from 45.8 in April, below the 46.0 reading expected by analysts in a WSJ survey.
The services PMI dropped to 55.9 in May from 56.2 in April but the reading was above the expected 55.7.
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Sterling edged lower after a key measure of manufacturing and services activity fell short of expectations.
The S&P/CIPS U.K. composite purchasing managers' index fell to 53.9 in May from 54.9 in April as manufacturing activity contracted further and services activity grew at a slower pace. Analysts in a WSJ survey expected a reading of 54.1.
"Activity growth in private sector business softened last month to the lowest since March as subdued customer demand put a dampener on levels of new orders," CIPS said.
Read Sterling May Have Limited Scope to Rise Due to Rate Expectations
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The dollar edged higher as remarks from Federal Reserve officials Monday suggested not all policymakers think pausing interest-rate rises is possible in June, Commerzbank said.
"In this respect, the market is likely to hope for more insight from the Fed minutes, which will be published tomorrow."
Energy:
Oil prices flicked between small gains and losses as investors awaited fresh news on the U.S. debt ceiling standoff.
"Oil followed broader markets where sentiment remains weak as U.S. lawmakers try to find middle ground," ANZ said.
Adding to this is economic concerns in the U.S. and China, the two largest consumers of oil in the world."
Metals:
Base metals and gold prices continued to fall as Western economic woes and slower-than-expected Chinese demand cut consumption.
BMI, a subsidiary of Fitch Solutions, has lowered its 2023 aluminum price forecast to an average of $2,500 a ton from $2,600 a ton, pressured by China weakness.
"Prices will likely remain under pressure in 2023, with no return to 2022 highs, as global demand remains weak and domestic supply increases in mainland China," BMI said.
DOW JONES NEWSPLUS
EMEA HEADLINES
Eurozone Economy's Pace of Growth Eased in May, PMIs Suggest
Business activity in the eurozone moderated in May, still showing output grew for a fifth straight month, though with new business inflows nearly stalling and a struggling manufacturing sector, the outlook has become bleaker, data from a purchasing managers survey showed Tuesday.
The HCOB Flash Eurozone Composite PMI Output Index-which gauges activity in the manufacturing and services sectors-fell to a three-month low of 53.3 in May, from a downwardly revised 54.1 in April.
Julius Baer Shares Slump After Weaker-Than-Expected 4-Month Figures
Shares in Julius Baer Gruppe sank in early trading Tuesday after figures for the first four months came in below analysts' expectations.
At 0744GMT, shares traded 7.7% lower at CHF57.96.
Vodafone and Nestlé Created Panels to Avoid 'Greenwashing' Allegations
Vodafone Group and Nestlé have set up panels of experts to double check environmental claims before they appear on products and marketing, a move by the multinationals to avoid allegations of so-called greenwashing.
The U.S. and the European Union are looking to weed out greenwashing, or the practice of companies overstating their efforts to help the planet. The U.S. Federal Trade Commission is updating its environmental marketing guidelines and the EU has proposed that businesses need to offer scientific evidence. Corporate claims related to greenhouse-gas emissions, such as "carbon neutral," "climate positive" and "net zero," are especially under the microscope.
Barratt Developments Chair John Allan to Step Down Early Amid Allegations
Barratt Developments said Tuesday that Caroline Silver will take over as chair of the board earlier than originally planned to prevent allegations against John Allan from becoming disruptive to the company.
The FTSE 100-listed house-builder said that Allan will step down as chair of the board on June 30 and Silver will replace him on that date. She was due to take over as chair on Sept. 6.
GLOBAL NEWS
Biden Can't Win in Debt-Ceiling Fight
President Joe Biden has no good options in Washington's fight over raising the debt limit.
The U.S. could be unable to pay all of its bills as soon as June 1 if Biden and congressional Republicans can't reach a deal-and every path forward carries political risks for the president.
Debt-Ceiling Fight Sends Investors Hunting for New Havens
Traders worried about a potential U.S. default are swapping their go-to safe haven for the bonds of America's top-rated companies.
Just days or weeks before the government faces a possible funding shortfall, investors are shunning U.S. Treasury bills that will mature over the next several months, while paying a premium to buy debt issued by Microsoft and Johnson & Johnson, two of the highest-rated U.S. companies.
Pro Take: Yield-Curve Pioneer Says This Inversion Warning Is Real
The Duke University finance professor who developed a tool that has reliably predicted economic contractions for decades said in January that his indicator might be sending a false recession warning.
He's not saying that now.
Online Retailers Tighten Return Policies to Boost Profits
Returns are one of the biggest profit drains for online retailers. Fixing that has become a priority as inflation continues to crimp shoppers' spending on everything from clothes to home décor.
Amazon gives a heads-up to shoppers about items that have high return rates. Online retailer Dress the Population offers discounts to people who agree not to return their purchases. Retailers with large numbers of physical stores such as Zara and H&M are also making adjustments like charging shoppers for sending returns by mail.
A Housing Bust Comes for Thousands of Small-Time Investors
Few investors rode the pandemic-era housing boom as high as Jay Gajavelli. Fewer still have fallen as far.
Before Gajavelli found his real-estate career, the 61-year-old immigrant from India was just another information-technology worker, putting in 60-hour weeks for a middling job in Dallas. Last year, Gajavelli's company owned more than $500 million worth of Sunbelt apartment buildings with more than 7,000 units, and was one of Houston's biggest landlords.
Questions About Trump, DeSantis and Biden Fuel Growth of 2024 GOP Field
The 2024 Republican presidential-nomination race is expected to crack the half-dozen mark for higher-profile entrants this week and several more are considering bids, a sign that prospective candidates don't think Donald Trump has the contest locked up and view Florida Gov. Ron DeSantis as a flawed lead challenger to the former president.
Republicans also see President Biden's weak polling as an enticement.
New Chinese Ambassador Departs for the U.S. Under a Cloud of Uncertainty
SINGAPORE-China's new ambassador to the U.S. is set to arrive in Washington to take up his post on Tuesday, a potential signal of Beijing's willingness to improve communications despite a recent cascade of diplomatic dust-ups.
Xie Feng, a veteran diplomat with extensive experience in managing U.S.-China ties, left Shanghai for the U.S. around noon local time on Tuesday, according to people familiar with the matter. He arrives at an uncertain moment in relations between Beijing and Washington, as contradictory messages emanate from the two capitals.
Biden, McCarthy Hold 'Productive' Meeting but No Debt-Ceiling Deal Yet
WASHINGTON-House Speaker Kevin McCarthy and President Biden failed to reach a deal to raise the debt ceiling following a high-stakes meeting at the White House but planned to press ahead with talks, as the U.S. nears a deadline to prevent a first-ever default.
(MORE TO FOLLOW) Dow Jones Newswires
05-23-23 0610ET
