European shares opened slightly lower on Monday, as investors’ caution over U.S. debt-ceiling talks was balanced by the possibility that the Federal Reserve would soon pause its monetary tightening efforts.
Europe’s Stoxx 600 fell 0.1%, snapping last week’s gains, while France’s Cac 40 and Germany’s Dax each opened 0.2% lower.
Policymakers in Washington restarted talks to raise the U.S. debt ceiling after a strike on Friday, with President Joe Biden discussing the issue with Republican House Speaker Kevin McCarthy on Sunday.
However, the looming deadline weighed on markets amid growing fears that an unprecedented government default over the summer could rattle global markets and tip the U.S. economy into recession.
The yield on the rate-sensitive two-year Treasury note fell 0.06 percentage point to 4.22%, while the yield on the benchmark 10-year note fell 0.04 percentage point to 3.65%. When prices fall, bond yields rise.
The dollar was flat against a basket of six other currencies.
Meanwhile, Federal Reserve Chairman Jay Powell warned on Friday that turmoil in the U.S. regional banking sector has tightened credit conditions and could limit how much the central bank needs to raise interest rates to its 2 percent target.
U.S. futures were subdued ahead of the New York open, with contracts tracking Wall Street’s benchmark S&P 500 down 0.1%, while contracts tracking the tech-heavy Nasdaq 100 were flat.
European investors are awaiting the release of Monday’s euro zone consumer confidence index. Analysts expect a reading of -17% for May, up slightly from the previous month but still in negative territory, indicating that overall sentiment remains pessimistic as high interest rates and prices continue to weigh on the region.
Asian stocks were outliers, with Hong Kong’s Hang Seng up 1.2%, China’s CSI 300 up 0.6% and Japan’s Topix up 0.7%.
Shares in China’s semiconductor sector rose after Beijing banned key infrastructure operators from buying products from U.S. chipmaker Micron Technology, saying it posed a “serious cybersecurity risk.”
SMIC, China’s largest contract chipmaker, rose 1.2 percent on Monday, while Hong Kong’s No. 2 Hua Hong Semiconductor rose 0.9 percent. The Hang Seng Technology Index rose 2.3 percent.