China slows down, oil drops, politicians vote

In the US today, politicians are voting in Congress on the debt ceiling. Although the probability of a "happy-end" is high, the market is beginning to fear that something may go wrong. Several congressmen of both parties signaled its dissatisfaction. Tech stocks continue to do well, benefiting from continued optimism about artificial intelligence. Crude oil lost over 4%. This morning the dollar continues to strengthen a major currency pair falls below 1,0670.

Waiting on the stock exchanges

The topic of the US debt limit will expire in a moment, but even today it will fuel the moods on the stock exchanges and on the currency and commodity markets. History shows that this kind of problem every time finds its solution, so there is no indication that this time we will get a surprising finale.

Now the stock exchanges are in the waiting phase - at least yesterday's volatility suggests that. The Dow Jones lost 0,15 percent. and the SP500 closed the day at the same level it started it at. Only companies with Nasdaq index gained, which was a consequence of investors' hopes that the dynamic development of AI will contribute to increased demand for "chips". This is a simple explanation of what is happening right now.

Yesterday, the crude oil market was interesting, as it lost around 4 percent. We are talking about both varieties: WTI and Brent. There are several explanations of this phenomenon. To some extent, the sentiment could have been influenced by the risk of breaking the deal in the US.

Local oil minima

Another factor that I think was key was that the market was speculating more and more that OPEC + both will not make additional production cuts and hence the sale. A secondary argument could also be that the growing risk of interest rate increases in the US in June will significantly slow down the US economy, which in turn will reduce the demand for the commodity. Oil is setting new local lows this morning.

Overnight, the price was moderately affected by worse than expected PMI data from China. Industry indicator amounted to 48,8 points. which is less than expected, compared to 49,2 points. in April, and remained below the neutral level of 50 points. The poor performance for industry is surprising, especially when we consider that the government has put in place a lot of policy stimulus to spur investment in infrastructure, strategic industries and modernization. The PMI for the non-manufacturing sector, which includes services and construction, was 54,5 points. though it was lower than the previous reading. While this reflects the ongoing recovery in consumption and services, the pace of growth slowed after a strong first quarter.

Source: Łukasz Zembik, OANDA TMS Brokers