European shares lack momentum after debt ceiling deal

European market indices fell marginally on Monday, lacking impetus in thin trade, but Wall Street futures remained optimistic after the US achieved a debt ceiling deal over the weekend.

On Saturday, US President Joe Biden and senior congressional Republican Kevin McCarthy reached a tentative agreement to lift the federal government’s $31.4 trillion debt ceiling, preventing the United States from defaulting on its obligations. The agreement is anticipated to bring only short-term comfort to investors, as concerns about inflation and potential rate hikes persist.

Asian equities surged largely, with Tokyo’s Nikkei reaching a record 33-year high. However, Chinese equities plummeted after data showed a drop in earnings at China’s industrial businesses, the latest indicator of the country’s economic slowdown.

The MSCI global equity index was up 0.1% at 09:49 GMT.

European stock indices began higher, but subsequently fell. The STOXX 600 in Europe was flat for the day. However, Wall Street futures increased, with S&P 500 e-minis rising 0.3% and Nasdaq e-minis rising 0.4%.

Monday is a holiday in the United States and the United Kingdom.

Six-month credit default swaps in the United States narrowed, lowering the cost of insuring against short-term exposure to a U.S. debt default. However, the five-year swap climbed, indicating that markets are wary about the transaction.

According to Samy Chaar, chief economist at Lombard Odier, if the debt limit deal is approved by Congress, market attention would go back to the US Federal Reserve’s interest rate intentions.

Government bond rates in the eurozone fell ahead of eurozone inflation statistics scheduled on Wednesday and Thursday.

The benchmark 10-year German yield was 2.447, down 9 basis points.

The US dollar index was unchanged at 104.25, while the euro was slightly down at $1.0714.

During Asian trade, the dollar temporarily reached a six-month high versus the yen.

Turkey’s currency fell to a new low against the dollar after President Tayyip Erdogan won a presidential election on Sunday, extending his increasingly autocratic reign into a third decade.