Global stocks were largely unchanged this week as investors shifted their focus to the debt ceiling. In a letter to Congress on Monday, Treasury Secretary Janet Yellen warned that the government could run out of money as early as June 1. On Tuesday, President Biden met with congressional leaders to help facilitate a deal to potentially avoid default. Following the meeting, President Biden indicated progress was being made, while House Speaker Kevin McCarthy said it may be possible to get a deal by the end of the week.
While both parties appear to have reached agreement on certain issues, we still believe both sides are too far apart on several key issues for a deal to happen in the coming days. Despite optimism in the markets surrounding recent developments, the most likely outcome is probably a short-term extension of the debt limit.
On the data front, retail sales rose by 0.4% in April, missing expectations for a much larger gain of 0.8%. However, core retail sales jumped by more than expected, benefitting from a further increase in e-commerce spending. Overseas, Japan saw its economy expand by 1.6% for the quarter, surpassing analysts’ estimates for a 0.7% increase. Elsewhere, inflation in the Eurozone accelerated by more than expected, with year-over-year inflation coming in at 7%, slightly higher than last month’s reading of 6.9%.
Source: GSAM, CNBC, JPMorgan
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