Tuesday Morning Cheat Sheet: 3 Stories Moving Markets

Markets were mixed in Asia on Tuesday. Japan’s Nikkei climbed 0.13 percent, once again extending its five-year high as the yen weakened to 102.7590 to the dollar. In Hong Kong, the Hang Seng fell 0.54 percent, led by losses at the Industrial & Commercial Bank of China, which declined after Goldman Sachs (NYSE:GS) said it would sell its stake in the bank. The S&P/ASX 200 fell 0.56 percent in Australia.

Markets were also mixed in mid-day trading in Europe. Germany’s DAX was off 0.32 percent following a report on producer prices, London’s FTSE 100 was up 0.11 percent following the release of inflation data, and the STOXX 50 index was off 0.67 percent on what may best be described as malaise.

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U.S. futures at 8:40 a.m.: DJIA: +0.07%, S&P 500: -0.01%, NASDAQ: +0.03%.

Here are three stories to keep an eye on:

1) Federal Debt Limit is Reset at $16.7 Trillion: The Treasury has begun to engage in “extraordinary cash management measures” to finance federal obligations. The government added $306 billion in new debt during the four-month suspension of the debt ceiling that began in in February, and the expiration of the measure is expected to revitalize the debt debate in Congress.

In a May 17 letter to the House of Representatives, Treasury Secretary Jack Lew wrote: “It is important to note that increasing the debt limit does not increase spending or authorize new spending; rather, it simply permits the United States to continue to honor pre-existing commitments to our citizens, businesses, and investors here and around the world. These commitments were already approved by Congress, and honoring them is not optional.”

2) German Produce Prices Continue to Decline: Producer prices declined 0.2 percent on the month in Germany in April, in line with economist expectations and matching March’s 0.2 percent contraction. On the year, prices are up 0.1 percent, slightly below expectations for a 0.2 percent gain, and slightly slower than March’s 0.4 percent pace. This is the fifth time Germany’s PPI has contracted in the past six months.

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Germany’s soft PPI action suggests that inflation in the consumer price index, which increased at an annual rate of 1.2 percent in April, will remain subdued.

3) Inflation in Great Britain Remains Subdued: Both producer and consumer price indexes in Great Britain increased less than expected in April. Producer price outputs contracted 0.1 percent on the month and grew 1.1 percent on the year, missing expectations for an increase 0f 0.2 percent on the month and of 1.4 percent on the year. Input prices contracted 2.3 percent on the month and 0.1 percent on the year, missing expectations for a less-severe contraction of 1.5 percent on the month and growth of 0.3 percent on the year.

On the consumer side of the equation, prices increased 0.2 percent on the month, less than the 0.4 percent expected by analysts. Prices climbed 2.4 percent on the year, less than the 2.6 percent expected. In line with what most economists expect from central banks, the soft data may show that there is still room to tweak monetary policy.

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