Markets on Edge as US Debt Deal Remains Elusive

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Equity markets experienced a mixed performance on Tuesday amid growing concerns over the lack of progress in US debt ceiling negotiations, raising fears of a potential default. Traders were also weighed down by disappointing economic data from China, which highlighted weak domestic demand and the challenges in the country's economic recovery.

Despite the general belief that an agreement will eventually be reached, Republican House Speaker Kevin McCarthy expressed his dissatisfaction with the current state of talks, stating that staff-level meetings have been unproductive and that a conclusion is far from being reached. Republicans are pushing for spending cuts as a prerequisite for passing the bill, while Democrats are advocating for a "clean" increase in the borrowing limit without any conditions attached.

US President Joe Biden, who remains optimistic about bridging the gap between the two sides, is scheduled to meet with McCarthy and other congressional leaders at the White House later in the day. Treasury Secretary Janet Yellen had previously warned that the government could run out of cash by June 1, leading to a potentially devastating default on debt repayment obligations.

In addition to the debt ceiling concerns, two senior Federal Reserve officials indicated their support for pausing the central bank's interest rate hikes next month. Chicago Fed boss Austan Goolsbee emphasized the need to assess the impact of the rate increases implemented over the past year to curb inflation. Atlanta Fed President Raphael Bostic also favored maintaining the current policy stance at the June meeting, while signaling that future rate hikes were more likely than cuts due to persistent price pressures.

Despite a rally in tech firms driven by news of US investor Michael Burry increasing his investments in e-commerce giants Alibaba and, Hong Kong's market remained flat. However, below-forecast data on Chinese retail sales, industrial production, and fixed asset investment reflected the ongoing struggle of the world's second-largest economy to recover from the impact of stringent zero-COVID measures.

While Tokyo, Seoul, Taipei, and Manila saw slight gains, Shanghai, Sydney, Singapore, Mumbai, Jakarta, and Bangkok experienced losses. London registered a morning increase, Frankfurt remained stable, and Paris declined slightly.

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