ASX Market Update

A Crucial Evening for U.S. Debt Ceiling Talks

This Tuesday, the 23rd of May, holds immense significance for Wall Street as investors keenly turn their focus towards the vital debt ceiling negotiations. Scheduled at 5:30 pm, President Biden is set to reconvene with House Speaker Kevin McCarthy to further the discussions on the debt ceiling, with a scant ten days remaining until the earliest date Treasury Secretary Janet Yellen warned the U.S. could face default.

Despite the anxieties surrounding these talks, the S&P 500 saw a marginal increase of 0.02% on Monday, while the Dow Jones fell by 0.42% and the tech-heavy NASDAQ rose by 0.5%.

Global Market Movements Amid Earnings Reports and Political Developments

Whilst the reporting season draws to a close, investors await the release of first-quarter earnings from Zoom Video and Lowe’s. Concurrently, the U.S. has committed to supporting the development of Australia’s critical minerals industry. This pledge follows a bilateral agreement to align policies and investment to fuel the industry’s growth – a significant development for Australian miners and producers, who supply around half the world’s lithium and other rare earths.

Over in Europe, markets closed mixed as investors in the region also await key signs of progress toward raising the U.S. debt ceiling to evade the potential catastrophe of defaulting on debts. Meanwhile, Greece’s Athens General Composite Index saw a substantial surge of seven percent on Monday following a firm lead secured by the ruling conservative party, New Democracy, in Sunday’s elections.

Impacts on the Commodities Front

On the commodities front, oil prices fell for the third day on Monday as investors continued to assess the stop-start negotiations underway in the U.S. over the debt ceiling crisis. Concerns loom over the effect the pending debt ceiling outcome will have on energy demand, amidst China’s lacklustre economic recovery and the possibility of a U.S. recession. However, oil saw a slight rebound on Tuesday, trading 0.64% higher at 72 US dollars and 15 cents a barrel. Gold traded 0.22% lower at 1972 US dollars an ounce, while iron ore was down 1.81% at 108 US dollars and 50 cents a ton.

Changes in the Local Market

In the local market, the first trading session of the week closed 0.22% lower, primarily weighed down by investors selling out of real estate and communication services stocks. This was in spite of a 1.5% rally for the tech sector. The payments company Tyro saw a decline of over 16% on Monday after Potential Capital abandoned takeover talks following the completion of due diligence.

In addition, new regulations in the ‘buy now, pay later’ sector sent shock waves through the share price of major players such as ZipCo and Block, the parent company of Afterpay. The regulations are set to impose more stringent requirements for credit checking to prevent consumers from taking on unaffordable debt through ‘pay later’ options.

A Look Ahead

Looking forward, the Australian SPI futures are indicating that the local index is expected to open 0.07% higher. As stocks such as Amcor and Elders trade ex-dividend today, it might be worth considering buying in today, as stocks generally trade lower on the ex-dividend date.