Volkswacht Bodensee - Markets fall over US debt ceiling, China growth concerns

Investors are also fretting over another possible interest rate hike by the US Federal Reserve next month as inflation remains elevated.

Expectations of higher borrowing costs boosted the dollar, seen as a haven investment in times of economic turmoil.

Oil prices edged lower on weaker demand concerns in leading energy consumers China and the United States.

While the debt deal between US President Joe Biden and House Speaker Kevin McCarthy should have buoyed the markets, multiple Republicans have announced their opposition ahead of a vote in Congress later on Wednesday.

Wall Street opened lower while London was down 0.5 percent, Paris shed more than one percent and Frankfurt dropped 0.8 percent in afternoon deals.

"With some hardliners in the Republican party coming out against the agreement, its passage through Congress could be bumpy," warned AJ Bell investment director Russ Mould.

Members on both sides of the political spectrum have raised concerns about the agreement, with Republicans saying it does not have enough spending cuts and the left wing of the Democratic Party unhappy that Biden agreed to any limits at all.

The Treasury has warned that if the borrowing ceiling is not lifted by June 5, the government will run out of cash to service its debt obligations.

While McCarthy has described the deal as "transformational" and expressed confidence the bill will pass, leading Freedom Caucus member Chip Roy called it a "turd sandwich".

He later warned McCarthy would face a "reckoning". That came as another Republican representative, Dan Bishop, called party members to vote McCarthy out as speaker.

Sentiment was given an extra jolt after data showed China's manufacturing activity contracted even further last month as leaders struggled to kickstart the world's number-two economy.

The country's growth has stalled this year, despite expectations for a surge after strict Covid rules were lifted at the end of last year.

"The release of Chinese PMI data further soured the mood of the market, with the unspectacular numbers reminding financial markets that a strong Chinese recovery remains a hope rather than a reality," said Tim Waterer, chief market analyst at KCM Trade.

Traders are also bracing for the Fed's rate decision next month after data last week showed a key gauge of inflation rising in April.

In Europe, however, data showed inflation in the eurozone's top economies, Germany and France, cooled sharply in May.

- Key figures around 1345 GMT -

New York - Dow: DOWN 0.4 percent at 32,906.44 points

London - FTSE 100: DOWN 0.5 percent at 7,487.81

Paris - CAC 40: DOWN 1.1 percent at 7,133.66

Frankfurt - DAX: DOWN 0.8 percent at 15,786.33

EURO STOXX 50: DOWN 1.0 percent at 4,246.79

Tokyo - Nikkei 225: DOWN 1.4 percent at 30,887.88 (close)

Hong Kong - Hang Seng Index: DOWN 1.9 percent at 18,234.27 (close)

Shanghai - Composite: DOWN 0.6 percent at 3,204.56 (close)

Euro/dollar: DOWN at $1.0698 from $1.0735 on Tuesday

Dollar/yen: DOWN at 139.63 yen from 139.79 yen

Pound/dollar: DOWN at $1.2402 from $1.2414

Euro/pound: DOWN at 86.22 pence from 86.47 pence

Brent North Sea crude: DOWN 0.5 percent at $73.33 per barrel

West Texas Intermediate: DOWN 0.7 percent at $68.95 per barrel

burs-lth/giv

E.Schubert--BTB