U.S. Debt Concerns Remain the Dominant Theme in Markets

Pessimism continued to dominate global markets on Tuesday, amid the failure of U.S. lawmakers to reach an agreement to raise the debt ceiling, where Democrats and Republicans continue to debate over a compromise plan to raise the debt ceiling and reduce the deficit one week before a deadline set by the U.S. Treasury Department, which after the United States will default on its debt payments.

The United States faces the risk of defaulting on its debt payments if a deal is not reached, and such an event is expected to lead to a huge panic wave across global markets, where some even believe it could send the U.S. economy back into recession.

Moreover, data from the United States signaled more weakness, as the S&P/CaseShiller house price index showed home prices fell in 20 metropolitan cities in the United States, while new home sales also fell by 1.0% in June to reach 312,000 units, compared with 319,000 units in the prior estimate. On the other hand, the Conference Board released the consumer confidence index for the month of July, where consumer confidence rose above expectations to 59.5 from a prior revised estimate of 57.6, but negativity remained widely spread across European and U.S. markets.

Stocks in the United States fell by opening on Monday, where the Dow Jones Industrial Average was down by nearly 0.60% to trade around 12,515, while the S&P 500 index was down by nearly 0.40% to trade around 1332. European stock indexes were lower before closing on Monday, where FTSE 100 was down by nearly 0.25% to trade at 5910 and the DAX was down by nearly 0.35% to trade around 7317.

The U.S. dollar fell against a basket of major currencies on Tuesday, where the U.S. dollar index was trading at 73.72, compared with Monday’s closing level at 74.11, as markets opened with a downside gap. The Euro rose against the Dollar, where the EUR/USD pair traded at $1.4469, compared with the opening level at $1.4372, and the British Pound also rose against the Dollar, where the GBP/USD pair traded around $1.6384, compared with the opening level at $1.6279.

Gold prices were slightly lower on Tuesday after rising to a new record high on Monday at $1621.56 an ounce, where gold was trading around $1611 an ounce, and crude oil prices fell to trade around $98 a barrel.