Australia

Australian shares are pointing downward this morning following a poor session on Wall Street. As President Biden and congressional leaders continued to negotiate, investors grew increasingly anxious about the possibility of a federal default.

ASX futures were down 32 points or 0.4% as of 6:00am on Wednesday, suggesting a lower open.

US stocks wobbled for much of Tuesday before sliding deeper into the red, as investors monitored last-minute talks to stave off a US default, which some fear would upend financial markets.

Losses across major indices accelerated throughout the afternoon as the White House and congressional Republicans offered few hints of additional progress. The S&P 500 slipped 1.1%, with losses spanning every sector except energy, while the Nasdaq Composite slid 1.3%. The Dow Jones Industrial Average lost 0.7%.

Trading has been relatively calm in recent days as the clock ticks toward the "X-Date,” when the government has warned it will not have enough cash to pay its bills, which could be as soon as June 1.

In commodity markets, Brent crude oil advanced 1.3% to US$77.01 a barrel while gold added 0.1% to US$1,974.72.

Australian government bonds were higher, with the 2 Year yield moving up to 3.54% and the 10 Year yield increasing to 3.65%. US Treasury notes also increased, with the 2 Year yield climbing to 4.32% and the 10 Year yield rising to 3.70%.

The Australian dollar declined to 66.07 US cents from its previous close of 66.49. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, inched up to 97.42.

Asia

Chinese stocks ended lower with the benchmark Shanghai Composite Index falling 1.5% to 3246.24, the Shenzhen Composite Index down 1.0% and the technology-heavy ChiNext Price Index off 1.2%. A mixed bag of sectors weighed on the market. China Publishing & Media lost 6.1%, state-owned lender China Construction Bank declined 2.8%, while TV production firm China Television Media fell 7.3%. Analysts have been warning of a lack of clear catalysts for the A-share market, and advise patience before a clearer trading theme emerges.

Hong Kong shares ended lower amid growing concerns over US debt ceiling negotiations and the latest remarks from Federal Reserve officials that indicated the potential for additional interest rate increases. The Hang Seng Index widened morning losses and fell 1.25% to 19431.25. Most stocks on the index were lower. Semiconductor Manufacturing International Corp. led losses, dropping 6.4% after China banned major chip maker Micron from key information-infrastructure projects. Property stocks were also lower, with Country Garden Holdings declining 3.8% and Longfor Group down 1.5%. Pharmaceutical companies were among gainers. Both Wuxi Biologics and CSPC Pharmaceutical Group increased 0.7%.

Japan's Nikkei Stock Average fell 0.4% to close at 30957.77 in a likely technical correction after the benchmark index ended at a 33-year high on Monday. The US debt limit talks between President Biden and House Speaker McCarthy finished Monday without reaching an agreement, and this pattern seems to have made some traders very agitated, said Naeem Aslam, chief investment officer at Zaye Capital Markets. Among worst performers, automaker Toyota Motor slipped 4.8% and pharmacy chain operator Matsukiyo Cocokara dropped 3.1%.

Indian shares ended flat, as gains in Adani Group stocks offset negative sentiment over the US debt ceiling talks. The benchmark Sensex ended flat at 61981.79. Adani Wilmar rose 10% and Adani Ports & Special Economic Zone climbed 0.5%. Tech companies were among the losers. HCL Technologies dropped 1.1% and Tech Mahindra declined 1.2%.

Europe

European stocks mostly fell following a broadly lower session in Asia and an expected negative open in the US The pan-European Stoxx Europe 600 dropped 0.6%, the German DAX lost 0.4% and the French CAC 40 slipped 1.3%. Luxury goods stocks were among the biggest pan-European fallers.

The United Kingdom’s FTSE 100 closed 0.1% lower, in line with global peers, as the standoff on US debt ceiling talks continues, AJ Bell investment director Russ Mould said in a note. "Just how close Washington must push for there to be a genuine fear of default is an open question, but right up to the eleventh hour, or in other words the end of this month, the expectation is likely to remain that a deal will be done," Mould added.

Industrial and electronics products distributor RS Group was the worst performer on the British index as shares slipped 7.0% after the group warned that industrial-market trading had slowed. Retailers B&M and Frasers were down 5.0% and 4.2%, respectively.

North America

US stocks wobbled for much of Tuesday before sliding deeper into the red, as investors monitored last-minute talks to stave off a US default, which some fear would upend financial markets.

Losses across major indices accelerated throughout the afternoon as the White House and congressional Republicans offered few hints of additional progress. The S&P 500 slipped 1.1%, with losses spanning every sector except energy, while the Nasdaq Composite slid 1.3%. The Dow Jones Industrial Average lost 0.7%.

Trading has been relatively calm in recent days as the clock ticks toward the "X-Date,” when the government has warned it will not have enough cash to pay its bills, which could be as soon as June 1.

Many investors believe that Washington will produce an 11th-hour agreement to avoid a breach of the debt ceiling. But the growing potential of a default may also entice some stock traders to unload holdings in a bet the "black-swan event" shakes up markets, said Samuel Dedio, chief investment officer at Patrumin Investors.

"It's an outside risk that this could happen, and there could be downside volatility in stocks," he said. "But the past is present, and they've gotten deals done before."

A greater fear for investors is how a default could disrupt repayment of Treasury debt, widely considered the safest securities in the world, and send ripple effects across the companies, money-market funds and individuals that invest in it to manage their cash.

That anxiety has warped short-term debt markets, propelling yields on Treasury bills that mature June 6 to above 6% on Tuesday. The government's longer-term borrowing costs have also risen over the past week as investors have grown more skeptical that the Federal Reserve will begin cutting interest rates later this year if inflation eases.

"There's a lot of volatility in terms of what the Fed is going to do," Dedio said.

As investors retreated from stocks on Tuesday, pandemic-era winner Zoom Video Communications was one of Nasdaq's major losers. The teleconferencing software-maker fell 8.1%, after releasing a dimming outlook for its enterprise segment, despite posting better-than-expected earnings Monday.

Major technology stocks traded mostly lower, dragging down the tech-heavy Nasdaq. Microsoft slid 1.8%, while Google owner Alphabet slipped 2%. Facebook parent Meta Platforms dropped 0.6% and chipmaking giant Nvidia lost 1.6%.