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Debt limit optimism, Zelensky's G7 visit, Alibaba falls - what's moving markets.

By -- Comments from lawmakers in Washington spark hopes that they can agree on a deal to raise the U.S. debt ceiling and avoid a default that could have far-reaching consequences. Meanwhile, reports say that Ukraine's president will make an unexpected journey to the G7 summit in Japan, where Western leaders are preparing to unveil fresh sanctions against Russia.

1. "Steady progress" in debt ceiling talks

U.S. President Joe Biden was informed by staffers on Friday that "steady progress" is being made in the race to reach a deal to raise the country's more than $31 trillion debt limit, sources told Reuters on Friday.

According to the report, Biden, who is in Japan for this weekend's G7 summit, urged his team to keep pushing ahead with negotiations with aides representing Congressional Republicans. Both sides remain at loggerheads over spending plans, with the U.S. on the verge of hitting a potentially damaging default.

Officials widely expect that the country will no longer be able to pay its bills as soon as early June.

2. Futures point higher

U.S. stock futures edged into the green on Friday, but hovered largely near the flatline, as investors gauged the likelihood of lawmakers in Washington reaching an agreement to lift the debt ceiling.

At 04:26 ET (08:26 GMT), the Dow futures contract was up 4 points or 0.01%, S&P 500 futures added 2 points or 0.05%, and Nasdaq 100 futures climbed 8 points or 0.06%.

Wall Street's benchmark S&P 500 gained nearly 40 points or 0.94% in the prior session, its highest close of 2023, while the broad-based Dow Jones Industrial Average rose by 0.3% and the tech-heavy Nasdaq Composite jumped by 1.5%.

Shares advanced after House Speaker Kevin McCarthy, the de facto Republican leader in the discussions, suggested that the House of Representatives may vote on a deal on the borrowing limit as early as next week. Senate Majority Leader Chuck Schumer later urged members of the upper chamber of Congress to also be ready to vote on a day's notice.

3. Zelensky to attend G7 summit

Ukrainian President Volodymyr Zelensky is set to join leaders from the Group of Seven major democracies in person at a key summit in Japan, according to multiple media reports.

The conflict in Ukraine was already due to dominate discussions at the gathering, which begins today and lasts until Sunday. But Zelensky's unexpected presence (he was initially slated to appear by video conference) is seen as a push by Ukraine to bolster Western military support, particularly in Washington.

His visit also comes as the G7 reportedly gears up to unveil stronger sanctions against Russia, with the group attempting to lessen the flow of funding into Moscow's war effort. On Thursday, officials told the Financial Times that the new sanctions would apply to everything from individuals and aircraft to ships and diamonds.

4. Alibaba's China sales slip

Hong Kong-listed shares in Alibaba Group (HK:9988) dropped by more than 6% on Friday after the e-commerce giant posted disappointing quarterly earnings due to sluggish consumer spending in China.

The company logged revenue of RMB 208.20 billion ($1 = RMB 7.04) for the three months to March 31, lower than analyst estimates of RMB 210.3B.

Alibaba's direct sales in China, which makes up the biggest portion of its revenue, also lost 1% in the quarter. The decline reflects a slow recovery in expenditures by Chinese shoppers this year following the lifting of draconian COVID-19 restrictions in the country. Spending has grown, but remains well below pre-pandemic levels.

While the stock had received some support in recent sessions, especially from well-known investor Michael Burry doubling his stake in the firm, today's losses saw it unwind most of these gains. The stock is now trading just above a two-month low.

5. Crude rises

Oil prices increased on Friday as hopes that the U.S. will avoid a possibly catastrophic default convinced some traders to buy back into heavily discounted markets.

At 04:31 ET, the U.S. crude futures jumped by 0.46% to $72.19 per barrel, while the Brent contract gained 0.53% to $76.26 a barrel.

The crude market is on course to add around 3% this week, the biggest weekly gain since early April, breaking a run of four straight weeks of losses.


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