London (AFP) – The euro slid Monday to the lowest level against the dollar in 17 months on worries about France’s high debt and deficits, which have sent its government bond yields soaring. An underwhelming 2027 budget plan unveiled last week fanned concerns that government spending will remain high ahead of next year’s presidential elections in which the far-right Marine Le Pen, seen as a fiscal populist, stands a chance of winning.
That has rattled bond investors at a time when interest rates — and hence borrowing costs — are rising in developed economies worldwide to combat inflation. French debt is projected to rise to nearly 122 percent of the country’s GDP next year, despite billions of euros in planned spending cuts. That has sent its 10-year government bond yield to 4.8 percent, the highest since the 2011 eurozone bond crisis.
“The fact that French bonds and the euro sold off last week, and the downward momentum could persist this week, is a sign that Europe is out of favour with investors and bond market vigilantes are watching developments in the eurozone closely,” said Kathleen Brooks, research director at XTB. A call for snap elections in Spain by Prime Minister Pedro Sanchez also surprised investors, after lawmakers rejected a hotly debated housing relief bill from his Socialist-led minority government.
“France had already been under pressure due to questions over fiscal credibility and political stability,” said Patrick Munnelly, market strategist at Tickmill Group. “Spain now adds another layer of uncertainty,” he added. “Europe’s political risk is weighing on the euro.”
Stocks meanwhile were broadly higher, with the Nasdaq opening higher after hitting another all-time high on Friday in the wake of weak US jobs data, and the broader Dow also still near record territory. That tempered expectations of an imminent rate hike by the Federal Reserve, and fueled optimism on Asian and European equity markets that the AI-fuelled rally still has room to run.
Paris was dragged lower, however, by Schneider Electric after the industry group unveiled a $22.6 billion all-cash deal to buy the US engineering software specialist PTC, which pulled its share price down nearly 10 percent. Lower oil prices provided additional support, after G7 countries, in coordination with the International Energy Agency, agreed Friday to immediately release 100 million barrels of diesel and crude oil to ease supply concerns caused by the US-Iran war.
Exports of Middle East oil, excluding Iran, surpassed their pre-war levels last week despite attacks on ships in the Strait of Hormuz, according to data from the maritime tracking firm Kpler. But Saudi Aramco chief executive Amin Nasser on Monday described oil stockpiles as “scarily thin” as the European winter looms.
– Key figures at around 1340 GMT –
New York – Dow: DOWN 0.4 percent at 50,079.71 points
New York – S&P 500: UP 0.2 percent at 7,737.11
New York – Nasdaq: UP 0.6 percent at 27,354.92
London – FTSE 100: UP 0.1 percent at 10,469.57
Paris – CAC 40: DOWN 1.1 percent at 7,811.57
Frankfurt – DAX: UP 0.1 percent at 25,249.47
Tokyo – Nikkei 225: UP 2.4 percent at 69,946.86 (close)
Hong Kong – Hang Seng Index: UP 0.3 percent at 24,040.34 (close)
Shanghai – Composite: Closed for a holiday
Euro/dollar: DOWN at $1.11.93 from $1.1256 on Friday
Dollar/yen: UP at 1578.18 yen from 157.87 yen
Pound/dollar: DOWN at $1.3196 from $1.3244
Euro/pound: DOWN at 84.84 pence from 84.99 pence
Brent North Sea Crude: DOWN 0.6 percent at $101.69 per barrel
West Texas Intermediate: DOWN 1.5 percent at $89.71 per barrel
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© 2024 AFP
