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Progress in U.S. Debt Ceiling Talks Boosts Equities and Lowers Gold Prices

Market Update - Daniel Ang The Accidental Trader Traders Academy International 3

Equities Soar as U.S. Debt Ceiling Talks Progress
Global equities experienced a significant boost on Thursday as progress was made in the U.S. debt ceiling talks. This positive development also led to a two-month low in gold prices. In addition, chipmaker Nvidia’s impressive revenue results drove the tech-heavy Nasdaq up by about 2%.

Reports indicate that U.S. President Joe Biden and top congressional Republican Kevin McCarthy are nearing an agreement on the U.S. debt ceiling. According to a source familiar with the talks, the two sides are currently only $70 billion apart from reaching a deal.

Market Performance
The Dow Jones Industrial Average managed to reverse its earlier losses and closed with a slight increase of 14.17 points or 0.04%, reaching 32,812.29. The S&P 500 experienced a more significant gain of 43.38 points or 1.05%, closing at 4,158.62. The Nasdaq Composite saw a notable surge of 238.79 points or 1.91%, ending at 12,722.95, primarily driven by Nvidia’s strong performance, which caused its shares to rise by 26%.

Federal Reserve’s Stance on Interest Rates
The release of minutes from the Federal Reserve’s latest meeting on Wednesday indicated that policymakers have become less certain about the need for further rate increases. It was reported that they “generally agreed” on the decreased certainty regarding additional rate hikes.

Boston Fed President Susan Collins expressed her belief that it may be time for the Fed to pause its interest-rate-hiking campaign. She suggested taking a moment to assess the impact of previous tightening measures before proceeding further.

Treasury Yields and U.S. Dollar Rise
Treasury yields experienced an increase, and the U.S. Dollar reached its highest level in over two months. The yield on benchmark 10-year Treasury notes rose to 3.8038%, while the two-year yield, which typically rises with expectations of higher Fed fund rates, climbed to 4.4935%.

German Recession Impacts European Markets
European markets faced pressure due to news of Germany, its largest economy, slipping into recession. Updated figures on German GDP revealed that the euro zone powerhouse had indeed entered a recession during the first few months of the year, contradicting initial readings.

Consequently, the Euro weakened by 0.2% against the Dollar, while the Dollar Index rose to 104.2. The USD/CAD pair rose to 1.3635, reaching its highest intraday level since April 28 at 1.3644. In early Asia trading, the pair was quoted at 1.3646.

Canadian Dollar Affected by Oil Price Decline
The Canadian Dollar faced headwinds as the price of oil, one of Canada’s major exports, declined. WTI crude prices dropped by 3.6% to as low as $71.64 a barrel after Russia downplayed the likelihood of further OPEC+ production cuts at its upcoming meeting.

Gold Prices Slide on Optimism and Economic Data
Gold reached its lowest level in two months on Thursday due to the optimism surrounding the U.S. debt ceiling talks. As the prospect of a deal lifted the biggest risk off the table, the demand for gold as a safe-haven asset diminished. Additionally, robust economic data fueled expectations of another rate hike by the Federal Reserve.

Spot gold fell by 0.74% to $1,942.48 per ounce, while COMEX gold futures settled down 1.1% at $1,943.70 per ounce.

Crude Oil Prices Decline on Russia’s Announcement
Crude oil prices saw a decline of $3 per barrel after Russian Deputy Prime Minister Alexander Novak played down the possibility of further OPEC+ production cuts at the upcoming meeting. The WTI crude finished down 3.38% at $71.83 per barrel, and Brent crude settled down 2.68% at $76.26.

Cryptocurrency Performance
In the cryptocurrency market, Bitcoin (BTC) experienced a 0.5% increase in the past 24 hours, trading at $26,446. Throughout the day, it fluctuated between a low of $25,890 and a high of $26,557. Similarly, Ethereum (ETH) traded 0.7% higher at $1,808, with its daily low and high at $1,763 and $1,815, respectively.

BNB (BNB) faced a slight decline of 0.3% and was priced at $304.96. Its intraday range oscillated between $302.94 and $306.68. XRP (XRP) experienced a marginal decrease of 0.2%. Cardano (ADA) and Dogecoin (DOGE) both faced declines of 1.5% and 0.1%, respectively.

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