Market Update

Global equity markets experienced a boost this week, following positive remarks from US President Joe Biden and the Speaker of the House of Representatives, Kevin McCarthy, regarding progress in their debt-ceiling discussions to avert a potential US default.
Though we anticipate that a default remains a distant possibility, it's crucial to note that the ongoing political dance in Washington, especially as the debt-ceiling deadline approaches, introduces risks. Any misjudgment during these negotiations could plunge the US into a more protracted recession than initially forecasted. Consequently, such uncertainties might keep equity markets tense in the near future.
Even if a last-minute resolution emerges, it doesn't guarantee insulation from economic repercussions. Post-agreement, there might be a significant surge in the issuance of US government bonds to refill the Treasury, which could strain the already vulnerable US banking sector. A tighter liquidity might prompt banks to enforce stricter lending criteria, potentially hampering economic growth.
Yet, it's not all bleak. The resolution of this fiscal impasse will likely bring a wave of relief across financial markets, restoring some level of confidence.
On another front, Chinese economic indicators this week underperformed against analysts' predictions. Metrics like industrial output, retail sales, and fixed investment reported slower growth rates, hinting at a possible deceleration in the country's economic resurgence after lifting COVID-19 lockdown measures.