Stock Markets Rise Following Agreement to Raise US Debt Ceiling

Stock markets rose yesterday morning, rejoicing that an agreement has been reached in the United States to raise the debt ceiling, even if the vote of Congress is not yet certain.

European stock markets opened in cautious optimism. Paris took 0.39%, Frankfurt 0.49% and Milan 0.41%. The London Stock Exchange is closed due to a public holiday, which will also be the case for Wall Street. The absence of British and American investors should cause a reduction in trading volumes, which may amplify the variations. In Asia, it was above all Tokyo that benefited from this agreement and gained 1.03%. Hong Kong lost 0.68% in the latest trading and Shanghai gained 0.28%.

Avoid the worst possible crisis

US President Joe Biden and Republican leader Kevin McCarthy reached an agreement over the weekend to raise the US public debt ceiling for two years and thus avoid a cataclysmic default. “The agreement avoids the worst possible crisis: a default for the first time in the history of our country, an economic recession, devastated retirement savings accounts, millions of jobs lost”, argued the Democratic President.

But the agreement must receive the approval of a divided Congress and is already the subject of a revolt of elected progressives and conservatives, some speaking of a “capitulation”. “Overall, the deal is more of a victory for Biden and the Democrats because it contains relatively limited budget cuts,” said political scientist Nicholas Creel. “There is always a chance, however slim, that hardline Republicans could undermine McCarthy’s efforts,” warns SPI Asset Management analyst Stephen Innes. “The joy of a potential agreement in the dispute over the American debt is limited”, because the battle to come in the American Congress this week will prove complicated, nuance from his side Andreas Lipkow, independent analyst.

This draft agreement nevertheless alleviates a subject of concern for investors who should “refocus on the myriad of concerns that have been pushing them to be cautious for more than a year”, and in particular expectations around the monetary policy of the US central bank, the Fed, and US economic statistics, according to Mr. Innes.

Inflation in the United States, which had been slowing for several months, started to rise again in April, both over one year and over one month, according to the PCE index published on Friday and favored by the Federal Reserve (FED). The higher-than-expected inflation figures “suggest that the Fed may not have yet completed its cycle of raising interest rates”. On the bond market, sovereign interest rates remained stable.

Erdogan, SoftBank Group et Borussia Dortmund

The indestructible head of state Recep Tayyip Erdogan claims victory in the presidential election in Turkey in which he won more than 52% of the votes, according to results covering more than 99.85% of the ballots of the second round. The Istanbul Stock Exchange’s BIST 30 index was up 2.28% in the morning. The Turkish lira was penalized by President Erdogan’s policy of maintaining very low interest rates despite very high inflation. It lost even more ground yesterday (-0.41%) against the dollar, at 20.06 Turkish liras for one dollar.

The stock of Japanese tech investment giant SoftBank Group soared 8.19% in Tokyo ahead of the Wall Street listing by the end of the year of its subsidiary, the British maker of Arm microprocessors, while the semiconductor industry is buoyed by enthusiasm for the development of artificial intelligence.

The action of the German football club Borussia Dortmund plummets 29% in Frankfurt after the club let slip the title of first division champion (Bundesliga) which was outstretched to it, in favor of Bayern Munich on Saturday.

Source: AFP

The Paris Stock Exchange delighted

The Paris Stock Exchange rose modestly yesterday morning, relieved of some of the stress linked to the risk of default by the United States thanks to the agreement reached over the weekend to raise the country’s debt ceiling.

The CAC 40 index rose by 0.29%, or 20.26 points, to 7,339.44 points. On Friday, the Parisian rating had experienced a technical rebound of 1.24%, but had fallen 2.31% over the week, its worst performance since mid-March and tensions in the banking sector.

Regarding France, the European rating agency Scope lowered the country’s outlook on Friday, which means that its rating could be downgraded in the future, as was the case at the end of April by the Fitch agency. With the approach of the verdict of Standard and Poor’s (S&P), which must update its note on France next Friday, the French government is active to convince of the seriousness of its budgetary trajectory. The interest rate on French government debt with a ten-year maturity stood at 3.08% yesterday morning, more or less stable compared to Friday.

Orpea makes progress on its restructuring

The Autorité des marchés financiers (AMF) on Friday granted exemptions to Caisse des dépôts, CNP Assurance, MAIF and MACSF, which will not be obliged to file a draft takeover bid at the end of the various capital increases in which they will participate to restructure the group of retirement homes and Orpea clinics.

This group of investors should hold 50.2% of Orpea following the group’s debt restructuring process and the accelerated safeguard procedure, the plan of which will also be submitted to the shareholders’ vote on June 16. . Orpea shares fell 4.16% to 2.10 euros.