London (AFP) – Stock markets diverged Monday as a deepening political crisis in France sent Paris into a tailspin, while a new Japanese ruling party leader buoyed shares in Tokyo. Gold pushed ever closer to $4,000 an ounce as the US government shutdown and expected interest cuts from the Federal Reserve boosted the precious metal’s attractiveness.
The euro fell against main rivals and French borrowing costs spiked as Sebastien Lecornu, who had been prime minister for less than a month, resigned just 14 hours after naming a largely unchanged cabinet. France’s “fractured parliament is making it nearly impossible to pass a budget that reduces the fiscal deficit,” said Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics. “With government borrowing running at more than five percent of GDP and the debt ratio rising, the risk premium on French government bonds will continue to widen,” he added.
Shares in French banks BNP Paribas, Societe Generale, and Credit Agricole all shed more than three percent. London also dipped, but Frankfurt’s stock exchange ended the day flat. On Wall Street, both the S&P 500 and tech-heavy Nasdaq Composite sat next to record highs as AI deals overshadowed concerns over a government shutdown that dragged into a second week. Shares in Advanced Micro Devices (AMD) jumped more than 33 percent after the chipmaker announced a multi-year partnership with OpenAI to develop AI data centers, which should bring it tens of billions of dollars in new revenue over the next five years.
In Asia, Tokyo surged almost five percent to a record high, and the yen sank on bets the new leader of Japan’s ruling party will loosen monetary policy to kickstart the economy. Sanae Takaichi, likely to become Japan’s prime minister this month, has previously backed aggressive monetary easing and expanded government spending. Traders are “enthused by the new Japanese leader, who promises to reignite stimulus to light a fire under the Japanese economy,” said Chris Beauchamp, chief market analyst at trading platform IG.
The yen weakened more than one percent against the dollar and hit a record low against the euro. Yields on 30-year Japanese bonds rose sharply, reflecting fears that the country’s already colossal debt will balloon further. After her victory Saturday, Takaichi pledged first to implement measures to address inflation and boost Japan’s economy, rural areas, and primary industries. “She has said that the Bank of Japan should not raise interest rates, which is feeding demand for stocks and weighing on long-term bond yield,” said Kathleen Brooks, research director at trading group XTB. “The decline in the yen is also a sign that the market is pricing out the prospect of BoJ rate hikes this year,” she added.
Oil prices jumped nearly one percent after OPEC+ agreed at the weekend to boost supplies by 137,000 barrels a day — less than initially expected. “The limited supply adjustment was seen as a supportive move that would help offset a glut in the oil market while still signaling confidence in global demand levels,” said Trade Nation analyst David Morrison.
– Key figures at around 1530 GMT –
New York – Dow: DOWN 0.1 percent at 46,696.12 points
New York – S&P 500: UP 0.3 percent at 6,736.19
New York – Nasdaq Composite: UP 0.5 percent at 22,902.72
London – FTSE 100: DOWN 0.2 percent at 9,479.14 (close)
Paris – CAC 40: DOWN 1.4 percent at 7,971.78 (close)
Frankfurt – DAX: FLAT at 24,378.29 (close)
Tokyo – Nikkei 225: UP 4.8 percent at 47,944.76 (close)
Hong Kong – Hang Seng Index: DOWN 0.7 percent at 26,957.77 (close)
Shanghai – Composite: Closed for a holiday
Euro/dollar: DOWN at $1.1711 from $1.1742 on Friday
Pound/dollar: DOWN at $1.3474 from $1.3482
Dollar/yen: UP at 150.09 yen from 147.45 yen
Euro/pound: DOWN at 86.92 pence from 87.09 pence
West Texas Intermediate: UP 1.3 percent at $61.64 per barrel
Brent North Sea Crude: UP 1.4 percent at $65.41 per barrel
© 2024 AFP
