President Joe Biden is to meet congressional leaders ahead of talks to raise the US debt ceiling

New York (AFP) - Stock markets dropped Tuesday as investors awaited key US inflation data and tracked President Joe Biden’s battle with Republicans over the debt ceiling.

Wall Street indices finished moderately lower, while major European stocks closed flat or in negative territory.

London stocks fell into the red as investors returned from a long holiday weekend marking the coronation of King Charles III.

Traders now await Wednesday’s US inflation data that will shape the Federal Reserve’s interest rate policy.

A drop in the inflation reading in recent months has fanned hopes that the Fed will soon pause its tightening campaign and potentially even begin cutting rates by the end of the year, with the banking crisis reinforcing that view.

“US inflation data… will play a key role in shaping the Fed’s interest rate plans moving forward,” said Nigel Green, head of financial advisory firm deVere Group.

After lifting borrowing costs last week, officials hinted at a possible hold at their June meeting.

“We’ve finally reached the point at which the Federal Reserve may be at the end of its tightening cycle and we can start to look forward to when it can feasibly begin to ease policy in order to offset any shock to the economy,” said Craig Erlam, senior market analyst at trading platform OANDA.

The Bank of England will also announce its latest monetary policy decision on Thursday, as analysts expect another hike with UK inflation holding stubbornly above 10 percent.

Meanwhile, traders are keeping tabs on Washington as Biden started talks Tuesday with Republican House Speaker Kevin McCarthy and other congressional leaders on raising the debt ceiling.

There are worries that lawmakers will fail to reach a deal in time to increase the amount that the country can borrow to meet its repayment obligations, with right-wing Republicans determined to secure spending cuts.

Treasury Secretary Janet Yellen has warned the government could hit its limit by the start of June, adding that “financial and economic chaos would ensue” if a deal was not reached.

- Sweden real estate worries -

In Europe, real estate shares were dragged down by one of Sweden’s biggest commercial landlords.

There were signs of Sweden’s property crisis worsening as SBB took a series of steps to save cash, including scrapping a planned share sale, and continued focus on selling assets.

Its shares fell more than 24 percent on Tuesday, a day after the real estate group was downgraded to “junk” status by credit agency S&P.

Shares in Switzerland’s biggest bank, UBS, also fell after it announced that Credit Suisse CEO Ulrich Koerner would join its leadership team when it completes the merger with its fallen domestic rival.

In New York, Boeing jumped 2.3 percent as it reached an agreement to sell as many as 300 planes to Ryanair over the next decade. Ryanair climbed 3.6 percent in Dublin.

Asian stock markets were largely downbeat after data showed a steeper-than-expected drop in Chinese imports, suggesting recovery from zero-Covid policies in the world’s number two economy is not yet as strong as hoped.

- Key figures around 2050 GMT -

New York - Dow: DOWN 0.2 percent at 33,561.81 (close)

New York - S&P 500: DOWN 0.5 percent at 4,119.17 (close)

New York - Nasdaq: DOWN 0.6 percent at 12,179.55 (close)

London - FTSE 100: DOWN 0.2 percent at 7,764.09 (close)

Frankfurt - DAX: FLAT at 15,955.48 (close)

Paris - CAC 40: DOWN 0.6 percent at 7,397.17 (close)

EURO STOXX 50: DOWN 0.6 percent at 4,323.09 (close)

Tokyo - Nikkei 225: UP 1.0 percent at 29,242.82 (close)

Hong Kong - Hang Seng Index: DOWN 2.1 percent at 19,867.58 (close)

Shanghai - Composite: DOWN 1.1 percent at 3,357.67 (close)

Euro/dollar: DOWN at $1.0965 from $1.1004 on Monday

Pound/dollar: UP at $1.2622 from $1.2618

Dollar/yen: UP at 135.22 yen from 135.10 yen

Euro/pound: DOWN at 86.84 pence from 87.21 pence

West Texas Intermediate: UP 0.8 percent at $73.71 per barrel

Brent North Sea crude: UP 0.6 percent at $77.44 per barrel