by Laetitia Volga
PARIS (Reuters) – The Paris and Frankfurt stock markets are expected to rise slightly on Monday at the opening, after the agreement in principle reached on the raising of the public debt ceiling in the United States, which must now be submitted to votes of Congress.
The session will be played in the absence of some of the investors, the day being a public holiday in both the United Kingdom and the United States, with the consequence of the closure of the London and New York markets.
Futures contracts on indices suggest 0.19% for the Parisian CAC 40, an increase of 0.29% for the Dax in Frankfurt and 0.25% for the EuroStoxx 50.
After weeks of negotiations, US President Joe Biden announced on Sunday that he had finalized a budget agreement with the “speaker” of the House of Representatives to suspend the US debt ceiling until January 1, 2025.
It is now up to Congress, where each party tightly controls one chamber, to approve this tentative deal by June 5 – the date after which, according to the Treasury Department, the federal government may no longer be able to make payments.
“There could be a first relief (…) but the vagaries of the adoption of the agreement by Congress could curb (optimism)”, underlines Vishnu Varathan, head of economy at Mizuho Bank.
For Tony Sycamore, analyst at IG, the uncertainties concerning the monetary policy of the Federal Reserve should soon occupy the ground again.
The rise in the PCE, global and “core” inflation indices accelerated in April, which, together with the strength of consumption, reinforces in the eyes of investors the scenario of a further rise in the Fed’s rates in June.
During the week, other US statistics will be on the agenda and could influence the Fed’s thinking regarding its next decision, such as the number of job openings (Wednesday) and the official report on the job in May (Friday).
VALUES TO FOLLOW:
AT WALL STREET
On Friday, the major indices of the New York Stock Exchange ended up 1% to 2.19%. Over the week, the S&P 500 rose 0.3%, the Dow Jones fell 1% and the Nasdaq gained 2.5%.
The Philadelphia Stock Exchange’s semiconductor index gained 6.3%, still driven by optimism about artificial intelligence.
In stocks, Marvell Technology jumped 32% as the chipmaker said it would double its annual AI-related revenue.
Ford rose 4.72% after signing an agreement giving its customers access to more than 12,000 Tesla Superchargers (+6.7%) in North America.
IN ASIA
The Nikkei in Tokyo rose 1.03% and posted a new session high since July 1990, driven by optimism about an agreement on the American debt ceiling, by the weakness of the yen and the outperformance of stocks linked to the semiconductors.
On the other hand in China, the CSI 300 fell by 0.41% and the Hang Seng index by 0.59%, the announcement on Saturday of a 20.6% drop in profits for companies in the industrial sector in the first quarter confirming a fragile economic recovery.
RATE
On Friday, the yield on 10-year Treasury bonds climbed as high as 2.859%, the highest since March 10, as rising PCE price indices reignited speculation of a Fed rate hike.
In early trading in Europe, the ten-year German fell slightly around 2.53%.
CHANGES
On the foreign exchange market, the dollar is practically unchanged against a basket of reference currencies. It earlier hit a six-month high against the yen, on the heels of higher Treasury yields on Friday.
The euro appreciates slightly against the dollar and is trading just above 1.073.
In Turkey, the pound remains under pressure at 20.04 to the dollar, close to its low reached on Friday at 20.06, after Recep Tayyip Erdogan’s victory on Sunday in the presidential election, extending his 20-year reign in the head of a country polarized by increasingly authoritarian policies.
OIL
In the oil market, where debt ceiling relief dominates, Brent rose 0.45% to $77.3 a barrel and US light crude (West Texas Intermediate, WTI) 0.56% to 73, $08.
(Written by Laetitia Volga)
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