30 May - Spain's Ibex-35 stock index closed in the red for a second straight day on Tuesday after initial optimism over the US debt ceiling deal was overshadowed by the prospect of a tough parliamentary process.

A US House of Representatives committee will meet from 19:00 GMT on Tuesday to discuss the federal borrowing limit proposal, in what is expected to be a tense negotiation after several Republican parliamentarians announced they will oppose it.

"The market is cautiously discounting that the deal is done," said Thomas Hayes, president of Great Hill Capital LLC.

Reflecting investors' relative optimism on the matter, the cost of insuring exposure to a U.S. debt default fell further on Tuesday, while yields on longer-term U.S. Treasuries declined. [US/]

However, despite the initial risk appetite sentiment following the announcement of the deal on Saturday, investors now also fear that what was agreed is a compromise that could have negative consequences.

Analysts at JB Were said there could be up to $600 billion worth of US bill issues in the next six to eight weeks.

According to David Chao, Invesco's global strategist for Asia-Pacific, the size of the US Treasury issuance and its economic implications are now being studied.

"The announcement of a short-term debt deal is a boost to market sentiment, but puts pressure on growth due to government spending cuts and tighter liquidity conditions," Chao said.

"But the flip side of the coin is that the pressure on growth is doing the Fed's job in trying to cool the economy. It could have a dampening effect on inflation."

On the macroeconomic front, the session's data on both sides of the Atlantic provided a mixed bag for investors: while economic confidence in the eurozone fell below expectations in May, consumer confidence in the US fell less than expected, with household spending plans for big-ticket items rising over the next six months.

As a result, Spain's selective Ibex-35 closed down 12.60 points on Tuesday, or 0.14%, to 9,167.50 points, while the FTSE Eurofirst 300 index of large European stocks lost 1.01%.

In the banking sector, Santander lost 1.02%, BBVA retreated 0.66%, Caixabank gave up 0.84%, Sabadell fell 0.68%, Bankinter dropped 0.76% and Unicaja Banco lost 0.92%.

Among the large non-financial stocks, Telefónica fell 1.46%, Inditex advanced 0.67%, Iberdrola gained 0.31%, Cellnex gained 1.54%, and the oil company Repsol lost 2.28%.

Solaria fell sharply, dropping 4.21%. The stock has accumulated a drop of 22.1% so far this year, and is the second most affected stock of the Ibex-35 in 2023.

(Information by Darío Fernández; additional information by Shreyashi Sanyal, Joice Alves and Scott Murdoch).