Investing.com – Top lawmakers in Washington prepare to meet to break deadlock in debt ceiling negotiations, with a possible default in just over a week. China is banning local infrastructure operators from buying chips made by US semiconductor giant Micron, while Beijing’s trade practices target Japan’s G7 summit.
1. The debt ceiling meeting is approaching
US President Joe Biden and Speaker of the House Kevin McCarthy will meet later today as lawmakers in Washington fight to reach an agreement to raise the over $31 trillion debt ceiling and avoid a potentially damaging default.
McCarthy and the White House confirmed that negotiations would take place on Monday. On his way back from yesterday’s G7 summit in Japan, Biden spoke with McCarthy, who was the de facto Republican leader in the discussions.
Both men viewed Sunday’s talk as positive, but concerns remain that a deal may not be reached after talks stalled over the weekend.
The Treasury Department warned that the US government could run out of money to pay bills as early as June 1, adding that the impact of such an event could extend to the global economy.
2. Futures muted amid debt limit talks
US stock futures held steady on Monday ahead of today’s crisis meeting between Biden and McCarthy.
At 05:02 ET (09:02 GMT), Dow futures were up 8 points or 0.02%, S&P 500 futures were mostly unchanged and Nasdaq 100 futures were up 4 points or 0.03% .
The major indices retreated to end the previous trading week after debt limit negotiations reached an unexpected deadlock. Both Democratic and Republican lawmakers have previously signaled that they are close to a deal.
Elsewhere, U.S. regional bank stocks came under pressure on Friday after CNN reported Treasury Secretary Janet Yellen told bank executives more mergers may be needed to bolster the sector’s strength.
3. Fed rate path in focus
Traders will be eager to receive any guidance on the Federal Reserve’s rate plans today, and several US central bank policymakers are set to speak.
James Bullard, Thomas Barkin, Raphael Bostic and Mary Daly – all non-voting county presidents on the Federal Open Market Interest Rate-setting Committee – are due to take part in public discussions today.
Fed Chairman Jerome Powell suggested last week that tightening lending conditions in the wake of turmoil in the banking sector could mean the central bank will not have to raise the cost of credit as much as previously predicted to contain inflation.
Debate was already swirling around the possibility that the Fed would pause its multi-year rate hike campaign next month, although Powell noted he “could afford to look” at recent economic data before making a decision.
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4. Micron drops after China chip ban
Shares of Micron Technology Inc (NASDAQ:MU) fell in premarket trading Monday after China barred major local infrastructure operators from buying chips made by a US semiconductor company.
The move was seen as the latest escalation in tensions between Beijing and Washington over semiconductor shipments, with both countries citing national security concerns over trade in the key technology.
It also came after China became the focal point of a weekend meeting of the Group of Seven Richest Economies. In particular, leaders hit Beijing over what they described as “non-market” trade practices. A separate statement, which did not specifically name China, also condemned the rise in “incidents of economic coercion.”
In turn, the Chinese Foreign Ministry criticized the G7 for “hampering the development of other countries.”
5. Oil volatility amid debt ceiling uncertainty
Oil prices traded around a flat line in volatile trading on Monday, reflecting caution among traders about the prospects of US debt ceiling negotiations.
At 05:02 ET, US oil futures fell 0.04% to $71.66 a barrel, while the Brent contract fell 0.07% to $75.53 a barrel.
Both contracts gained around 2% last week. The move ended four weeks in a row of heavy declines fueled by concerns about slowing growth in China, the world’s biggest oil importer, and the potential economic repercussions of a US default.