Stocks slide despite 'productive' US debt talks

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Stock markets mostly slid and the dollar was mixed Tuesday after US President Joe Biden and House Speaker Kevin McCarthy said they held productive talks on the debt ceiling but had still not reached a deal to avert a calamitous default.

With just weeks to go before the United States runs out of cash, the standoff has become the key topic on trading floors on fears that a failure by Washington to pay its bills will send shockwaves through markets and the global economy.

Months of negotiations have failed to break the deadlock and lift the borrowing limit from the current $31.8 trillion, but things appear to be moving in the right direction after a series of Biden-McCarthy meetings.

"There is a cautious tone to trade with debt ceiling talks continuing," Finalto chief market analyst Neil Wilson said in a statement.

After their latest get-together Monday, the Republican Speaker said: "I felt we had a productive discussion. We don't have an agreement yet, but I did feel the discussion was productive in areas (where) we have differences of opinion."

He added that negotiators would "work through the night" to move the sides closer and that he and Biden would "talk every day to try to find a way to get this done".

For his part, Biden also described the talks as "productive" but that there were still "areas of disagreement".

While the two sides agree a default must be averted, they continue to disagree on certain issues. Democrats want to close tax loopholes to raise revenue and Republicans are calling for spending cuts.

Still, there is a broad view that a deal will eventually be done.

In Europe Tuesday, eurozone stock markets dropped as data showed eurozone economic growth slowed in May.

In Paris, shares in French digital entertainment group Vivendi fell by more than nine percent after a holding company linked to its main shareholder, French billionaire Vincent Bollore, sold off shares, thus dampening expectations he will make an offer for the company.

In London, BT Group stock nudged lower after French billionaire Patrick Draghi lifted his stake to almost one quarter, days after the UK telecoms group unveiled plans to axe up to 55,000 jobs.

Drahi, who was already BT's biggest shareholder, repeated however that he did not intend to make a takeover bid.

Back in the United States, the Fed was also in focus ahead of next month's policy meeting, with discussion revolving around whether it will lift rates again or stand pat for the first time since starting its hiking campaign more than a year ago.

By midday, the JSE's All-Share Index was down almost a percent, with Richemont losing more than 3%.

Additional reporting by News24.

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