What lurks behind the dip of European stock markets amidst US debt ceiling concerns?

European stocks fell as investors worry about the US debt ceiling deadline. The Stoxx 600 fell 0.7% and France’s CAC 40 fell 0.6% in the first hour of trading. US President Biden and four members of Congress failed to’ hash out’ a deal for raising the nation’s debt ceiling and avoid ‘government default.’ The Treasury Secretary warned the US could default on its debt as soon as next month if lawmakers do not make a compromise. US futures were up, with S&P 500 rising 0.2% and Nasdaq 100 gaining 0.1%. Analysts anticipate mid-June will be when markets will start to price in debt ceiling concerns. Bond yields rose when prices fell, with the yield on interest rate sensitive two-year Treasury notes rising 0.01 percentage points to 4.08% and the yield on the benchmark 10-year note falling 0.02 percentage points at 3.53%. The dollar index rose 0.3%. Asian stocks followed the US trend, with China’s CSI 300 falling 0.5% and Hong Kong’s Hang Seng index falling 2.3%, and Japan’s Topix rising 0.3%, following stronger-than-expected gross domestic product figures. Japan’s economy grew at an annualized rate of 1.6% in January to March.

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