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US stocks make gains but debt ceiling remains in focus

European and Asian stocks rose on Monday as investors cheered German economic data that indicated inflation in Europe’s largest economy was slowing.

Europe’s region-wide Stoxx 600 rose 0.2 per cent, extending its rally from last week, while France’s Cac 40 edged up 0.4 per cent and London’s FTSE 100 gained 0.3 per cent in the first hour of trade.

The moves came after Germany said its wholesale price index recorded its first year-on-year drop since December 2020. The decline added to signs the European Central Bank’s tightening campaign was cooling the region’s economy.

Eurostat, the EU statistics agency, meanwhile reported that the eurozone’s industrial production fell 1.4 per cent year on year in March, after rising 2 per cent the previous month. The reading was well below the 0.9 per cent rise forecast in a Reuters poll of economists.

Asian stocks also rose, with China’s CSI climbing 1.6 per cent and Hong Kong’s Hang Seng index adding 1.8 per cent. China’s renminbi fell on Monday to its weakest level against the dollar in two months.

Turkey’s Bist 100 fell as much as 6.6 per cent, before rebounding to trade 3 per cent lower, as Turkey’s presidential election looked to be heading towards a second round. Veteran leader Recep Tayyip Erdoğan on Monday narrowly led his main rival Kemal Kılıçdaroğlu but remained short of the 50 per cent required to secure victory.

All sectors of the index were in negative territory early on Monday, although financial stocks were the worst performers, falling more than 8.2 per cent. The index has tumbled by almost a fifth this year. The lira fell 0.2 per cent against the US dollar to $19.66.

The cost to protect against a default on Turkish debt soared on Monday morning. The spread on five-year credit default swaps jumped more than 100 basis points to 608bp, the highest level since November, according to Bloomberg data.

US stock futures rose, with contracts tracking Wall Street’s benchmark S&P 500 and those tracking the tech-heavy Nasdaq 100 rising 0.3 per cent ahead of the New York open.

Traders also prepared for the release of US retail sales data for April on Tuesday, which could offer insight into consumer sentiment as inflation cools. Analysts forecast that the Census Bureau will report a 0.7 per cent increase in overall retail sales from the previous month, following two months of declines.

The yield on interest rate-sensitive two-year Treasury bonds was flat at 4 per cent, while the yield on the 10-year bond was up 0.014 percentage points at 3.48 per cent. Bond yields rise when prices fall.

The dollar fell 0.1 per cent against a basket of six other currencies, despite data last week showing that US consumer expectations for long-term inflation had reached a 12-year high.

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