France’s political landscape is shifting dramatically as Michel Barnier’s government collapses following a vote of censure, prompting questions about future leadership and governance stability. A provisional budget is anticipated, while the Paris stock market experiences gains despite political uncertainty. Global financial attention remains on the US economy, with positive trends in stocks and cryptocurrency. Key economic indicators are set for release today, alongside notable changes in investment recommendations affecting various companies.
The Political Landscape in France: A New Chapter Begins
Once again, the political scene in France is heating up as the Barnier government faced a crucial setback and fell last night due to a vote of censure from a majority of deputies. This situation has sparked numerous questions reminiscent of last summer’s political turmoil: Who will step in to lead the executive branch? Will this transition happen swiftly in three days, or will it drag on for months? Is France currently ungovernable? Tonight at 8 PM, what serious message will Emmanuel Macron deliver to the nation?
This morning, Michel Barnier is expected to officially tender his resignation to the President of the Republic, in line with constitutional procedures. A provisional budget will likely be established to replace the one for 2024. Despite the National Assembly’s deep divisions into three factions, there is anticipation that they will approve a special law to support the continuation of the budget. This development indicates that the previous government’s commitments to reducing the budget deficit may not materialize. Fiscal changes are on the horizon, with a tax increase expected for assets, although retirees may find themselves in a more favorable situation than initially anticipated. Due to constitutional constraints, a dissolution of the National Assembly is not feasible at this time, but a new Prime Minister will still need to be appointed.
Market Reactions Amid Political Turmoil
Interestingly, amidst the political upheaval, the Paris stock market has achieved its fifth consecutive day of gains. Additionally, the spread between German and French 10-year debt yields (Bund vs OAT) narrowed to 84 basis points yesterday. A widening gap typically signals that investors perceive French debt as riskier compared to its German counterpart. The euro remained steady, even as one might have expected a decline following its recent losses against the dollar. However, this calm should not be taken for granted, as the coming weeks are likely to pose challenges for both French and European economic institutions.
While France grapples with its internal issues, global financial attention is largely fixated on the US, where Wall Street’s relentless rise seems to defy traditional market wisdom. Investors are keenly observing the US economic landscape, which Jerome Powell, the chairman of the Federal Reserve, recently described as being “in remarkable shape.” His comments on the job market and potential adjustments to interest rates were met with enthusiasm rather than skepticism, suggesting a growing alignment with a future where the US remains a global leader.
This risk appetite among investors is further illustrated by bitcoin’s recent surge, surpassing the $100,000 mark, following Donald Trump’s suggestion to appoint a crypto-friendly lawyer to head the SEC. In Asia, South Korea’s political climate remains tense with the president under investigation, impacting the stock market, which has seen a 7% decline since the start of the year. Meanwhile, Chinese markets are experiencing downturns due to governmental messaging that questions the pursuit of unrestrained growth, highlighting a need for a significant stimulus package to regain investor confidence.
As we look at the opening landscape, the CAC40 has limited its losses to 0.02% at 7301 points, while the SMI rises by 0.2% to 11,807 points, and the Bel20 remains stable at 4247 points.
Key Economic Announcements to Watch
Today’s economic calendar includes several important indicators: Switzerland’s unemployment rate at 7:45 AM, Germany’s factory orders at 8:00 AM, and France’s industrial production at 8:45 AM. Later, the eurozone’s retail sales figures will be released at 11:00 AM, followed by US announcements on layoffs by Challenger at 1:30 PM and new unemployment claims along with the trade balance at 2:30 PM. Stay tuned for these significant updates.
– Euro: 1.0522 USD
– Ounce of gold: 2647 USD
– Brent: 72.33 USD
– 10-year US: 4.19%
– Bitcoin: 103,139 USD
Notable Changes in Investment Recommendations
Several shifts in investment recommendations have been noted today: Avanza Bank has seen its rating upgraded from hold to buy by SEB Bank, with a price target raised from 244 SEK to 287 SEK. Meanwhile, JP Morgan maintains an overweight recommendation for Aéroports De Paris, increasing the price target from 138 EUR to 145 EUR. Other significant changes include a downgrade for Coface by Deutsche Bank from buy to hold and various upgrades for companies like Bellway and Deliveroo. Keep an eye on these developments as they may impact market performance.