Asian shares and US stock futures traded in narrow ranges in early trading as uncertainty over US talks to avoid a debt default cast a shadow over markets.

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Australian equities declined while Japanese stocks were flat after the S&P 500 and Nasdaq 100 both closed lower on Friday. Futures for Hong Kong’s Hang Seng Index edged higher after the benchmark slipped more than 1% Friday.

The dollar edged lower versus most of its Group-of-10 peers in an an otherwise calm start to trading that confined movements in most currencies to less than 0.2 percent.

President Joe Biden and House Speaker Kevin McCarthy are scheduled to meet in Washington following a “productive” call between the pair over the weekend. Yet one Republican negotiator is insisting on a multi-year spending limit, complicating talks even as default could come as soon as June 1.

Traders also remain fixated on the path for Federal Reserve’s benchmark interest rate, with bets for a hike in June trimmed to 25 percent as Jerome Powell signaled a pause. Minneapolis Fed President Neel Kashkari also said he may support a pause, Dow Jones reported.

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“Market pricing is firmly back to thinking the Fed will pause,” Chris Weston, head of research at Pepperstone Group Ltd., wrote in a research note. “The US debt ceiling, and the price action in US banks, are going to dominate the narrative.”

Australian and New Zealand government bonds were little changed after Treasuries declined on Friday.

The S&P 500’s drop Friday halted a two-day rally as it failed to stay above the closely watched level of 4,200. The $3.2 billion SPDR S&P Regional Banking exchange-traded fund slumped almost 2 percent on a report that Treasury Secretary Janet Yellen told the chiefs of large lenders that more mergers may be needed.

Stocks are primed to drop if the US fails to raise the debt limit and delays government payments. That’s the warning from a team of UBS strategists. Although it’s unlikely, if the US formally defaults and delays all payments beyond principal payments for a week, the S&P 500 will fall as much as 20 percent toward 3,400, the team led by Jonathan Pingle said.

Meanwhile, markets continue to be buffeted by tension between China and the US and its allies. President Biden said on Sunday he expected ties with China to improve “very shortly” after a spat over an alleged spy balloon earlier this year derailed relations. The comments followed the Group-of-Seven leaders meeting in Japan where the countries agreed to push ahead with efforts to reduce dependence on China for critical supply chains. Hours after Biden’s comments, Beijing announced a ban on Micron Technology Inc. products from key Chinese infrastructure.

Oil started the week little changed after a two-day drop and gold moved moderately higher, building on a 1 percent gain on Friday.

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