What if Russia doesn’t follow OPEC in production cuts? [Video]

The US 2-year yield fell sharply, while the S&P500 ended flat after hitting a fresh high since last summer on optimism that the US will finally agree to raise the debt ceiling.

The House will vote today to decide whether the debt limit bill gets approved at time to get a Senate approval by next Monday deadline. But the problem is that at least 20 conservative Republicans of the House rejected Kevin McCarthy’s compromise on debt ceiling, saying that spending cuts are not enough.

Any misstep at today’s House vote could send the US yields higher and stocks lower.

So far, there has been a widening gap between the way the stock and bond markets priced the threat of a US government default. And even the fact that the Federal Reserve’s (Fed) hawkish stance has a material impact on yields’ upside trajectory since the bank-stress dip, stock markets kept on climbing. But Nasdaq stocks are rate sensitive, and cannot be rate-hike proof if the Fed continues hiking the rates.

In energy, US crude tanked nearly 5% yesterday, and tipped a toe below the $69 pb mark on worries that Russia may not follow OPEC’s output cuts, in which case the internal conflict may prevent the cartel from reducing supply in a way to give a jolt to oil prices.

Elsewhere, the Chinese manufacturing PMI showed that contraction in activity accelerated in May instead of stepping back to the expansion zone. The faster Chinese manufacturing contraction also weighs on the sentiment this morning.