New York (awp/afp) – European stock markets, for the most part, ended in the green on Thursday after a political upheaval in Germany, while Wall Street welcomed the moderate speech of the American central bank (Fed).
On the Old Continent side, the market was driven by “the political tremors in Germany and the Bank of England which lowered its rate as anticipated by the markets”, comments Amélie Derambure, multi-asset manager at Amundi.
In Germany, the conservative opposition has asked Social Democratic Chancellor Olaf Scholz to submit to a vote of confidence in Parliament at the latest next week, after the breakup of the tripartite coalition in power.
Cause of the rupture: deep differences on the budgetary and economic policy to follow.
The social democrats and ecologists are in favor of reviving the stalled national economy through spending, while the liberals advocate social cuts and strict budgetary discipline.
“Investors are openly betting on the fact that the future government” which could be led by the conservatives according to the polls “will make appropriate political and economic decisions,” said Michael Holstein, chief economist of DZ Bank.
“The market will analyze Germany’s golden rule on the debt ceiling, if we had a revision of this rule, it would allow Germany to launch support measures, which is not good for the bond market, but favorable to stocks”, detailed Amélie Derambure.
As a result, the flagship index of the Frankfurt Stock Exchange, the Dax, ended sharply up 1.70% at 19,362.52 points, not far from its record close on October 21 (19,657.37 points). Elsewhere in Europe, Paris gained 0.76%, Milan 0.12% but London fell slightly by 0.32%. In Zurich, the SMI gained 0.59%.
The yield on German 10-year bonds reached 2.44%, compared to 2.40% at Wednesday’s close.
Its British equivalent was at 4.51%, against 4.56%, in the wake of the quarter-point drop in the Bank of England’s key rate, widely anticipated by the markets.
On Wall Street, the Nasdaq index (+1.51%) and the broader S&P 500 index (+0.74%) both set new closing records, while the Dow Jones finished in balance.
“Stocks remain driven by the resilience of the (American) economy and the hope of a growth policy, tax cuts, all things that would benefit corporate profits,” commented Angelo Kourkafas, of Edward Jones.
Donald Trump’s success in the presidential election is thus associated with an accommodating tax policy and proactive deregulation to create the conditions for economic growth.
Added to this climate which had already whipped Wall Street on Wednesday was the Fed’s decision to lower its key rate by a quarter of a percentage point, to a range between 4.50% and 4.75%.
During his press conference, the president of the institution, Jerome Powell insisted that the members of the Fed remained open to any possibility concerning the next meeting, on December 17 and 18.
However, “we have had confirmation that the Fed remains on the path to monetary easing”, underlined Angelo Kourkafas.
The bond market took note and the yield on 2-year US government bonds eased to 4.20%, compared to 4.26% the day before at the close.
Energy: John Wood sawn ___
The British energy services and consultancy group John Wood, already in difficulty, experienced a dizzying fall of 60.00% in London after an “underperformance” in the third quarter and the launch of an “independent evaluation” of certain strategic choices.
Bitcoin and dollar blow ___
Around 9:45 p.m. GMT, bitcoin was standing still (+0.10%) at $76,163.
The dollar fell 0.66% to 1.0802 dollars per euro, the day after reaching its highest level since June against the single European currency.
Oil prices ended up thanks to a technical rebound following the drop the day before, with operators still wondering about the consequences of a new Trump presidency.
The price of a barrel of Brent from the North Sea for delivery in January gained 0.95%, to close at $75.63.
A barrel of American West Texas Intermediate (WTI) due in December gained 0.93%, to $72.36.
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