Markets are cautious as talks over the U.S. debt ceiling offered something for optimists and pessimists, leaving European shares just shy of last week's 15-month top, and U.S. benchmark yields at their highest in two months, Reuters reported. President Joe Biden and House Speaker Kevin McCarthy could not reach an agreement on how to raise the U.S. government’s $31.4 trillion debt ceiling with just 10 days before a possible default. However, both sides stressed the need to avoid default with a bipartisan deal and said that they would continue to talk, leaving investors cautious about making large bets either way. Europe's broad STOXX 600 benchmark slipped 0.25%, trading a little below Friday’s 15-month intraday high, largely looking through activity data that showed euro zone business growth remained resilient, if a touch softer than expected. U.S. share futures were broadly flat, but the overall focus remained on events in Washington. “The best solution is to have a negotiated settlement that raises the debt limit,” said Samy Chaar, chief economist at Lombard Odier. He added that some investors were considering the market implications of “a compendium of less dramatic solutions, which may or may not be entirely legal, that might be used to avoid an actual default.” These could include using the 14th Amendment to the U.S. Constitution, which states that the public debt of the U.S. “shall not be questioned” though “[t]hat would trigger an inevitable lawsuit, which would go to the Supreme Court to resolve the issue once and for all,” Chaar said. Minneapolis Federal Reserve President Neel Kashkari said that it was a “close call” as to whether he would vote to hike again or pause at next month's meeting, and St. Louis Fed President James Bullard said another 50 basis points of hikes might be required. (Subscription required.)