Cac 40: The specter of a US debt default recedes, the stock market takes off

(BFM Bourse) – The CAC 40 rose sharply mid-session on Friday, reassured by the Senate’s approval of the deal to suspend the US debt ceiling. Market operators are also awaiting the release of US employment figures this afternoon.

The market can now turn the page on the tragicomedy of the US debt ceiling and move on. The Senate actually approved the bipartisan agreement overnight between Thursday and Friday that allows to suspend this cap for two years and thus avoid a default on the payment by the United States.

This restores color to the CAC 40, which gained 1.2% mid-session to 7223.97 points, limiting its decline for the week to 1.3% currently.

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“Now that the agreement to raise the US debt limit has been voted on by moderates in Congress (…), the risk of a US technical default is falling off the radar, at least until 2025. This is positive at the beginning of June after banking, inflation, economic and geopolitical risks weighed on asset performance in May”, judge Xavier Chapard of La Banque Postale Asset Management. “However, the list of uncertainties and risks remains long for this summer and we maintain a cautious allocation,” he adds.

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On the road to American employment

With this risk in hindsight, market operators will reserve their attention to the release of US employment figures for May, published at 2:30 p.m. Economists surveyed by The Wall Street Journal expects 190,000 job creations and an unemployment rate of 3.5%.

These data will once again fuel market speculation about the US central bank’s (Fed) intentions at its next monetary policy meeting on the 13th-14th. June. Investors are relatively divided at the moment. According to CME Group’s FedWatch tool, they expect less than 30% on a 25 basis point (or 0.25%) increase in policy rates and just over 70% on the status quo.

As for equities, the renewed risk appetite favors cyclical stocks, with Renault leading (+3%, the biggest gainer in the CAC 40), ahead of ArcelorMittal (+2.7%) and Saint-Gobain (+2.6%).

On the smaller side, AB Science (+4%) is driven by obtaining a patent in Canada for its flagship molecule, mastinib.

In the other markets, the euro is stable against the dollar at 1.0764 dollars. Oil contracts are advancing slightly and are also benefiting from the return of risk appetite. The North Sea Brent contract for August was up 1.7% at $75.52 a barrel. barrel, while the July contract is also up 1.7% to $71.28 per barrel. barrel.

Julien Marion – ©2023 BFM Bourse

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