European stocks edged higher Monday after soft U.S. payrolls data ramped up bets on a September interest rate cut, although French political uncertainty is likely to limit gains.
At 03:02 ET (07:02 GMT), the DAX index in Germany climbed 0.7%, the CAC 40 in France gained 0.4% and the FTSE 100 in the U.K. rose 0.3%.
Likely Fed cut helps sentiment
Risk assets received a boost Monday after investors digested the previous week’s disappointing U.S. jobs report, cementing expectations of a rate cut from the Federal Reserve when it meets next week.
Signs of a slowing U.S. economy means that markets are very confident that the Fed will cut interest rates by at least 25 basis points during its September 16-17 meeting.
The only question left to be answered is whether it’s a 25 basis point cut or a jumbo 50 basis point cut, and the U.S. inflation report on Thursday will be pivotal in that debate.
French political uncertainty
However, gains are likely to be limited as France’s fourth prime minister in three years, François Bayrou, faces almost certain defeat in a confidence vote later in the session, tipping the eurozone’s second-biggest economy further into political uncertainty.
France faces acute pressure to repair its finances, with last year’s deficit nearly double the EU’s 3% limit of economic output, but Bayrou’s budget bill is unlikely to secure a majority.
The turmoil threatens France’s ability to rein in its debt, with the country’s 30-year government bond yield last week hitting a level last seen in June 2009.
France’s credit rating was downgraded by Moody’s after its previous government collapsed last year, and a repeat would be a heavier blow, pushing it to a lower rating and raising the risk of forced selling of its already pressured bonds.
Ishiba steps down as LDP leader
Political instability also increased in Japan over the weekend after Prime Minister Shigeru Ishiba said on Sunday that he will step down as the leader of the Liberal Democratic Party, just weeks after its ruling coalition suffered a crushing defeat in the upper house elections.
Ishiba signaled that his resignation was also after Tokyo had secured a trade deal with the U.S., which will entail relatively lower tariffs on Japanese goods.
But his abrupt resignation now opens the door to a potential leadership struggle in the world’s fourth-largest economy, especially after the LDP lost its majority in the upper house.
German exports fell in July
German exports unexpectedly fell in July while industrial output rose, data showed on Monday.
German exports fell by 0.6% in July compared with the previous month, according to data from the federal statistics office, a weaker result that the 0.1% increase expected.
Imports dropped 0.1% compared with June.
German industrial production rose by 1.3% in July compared to the previous month.
Crude rises after OPEC+ meeting
Oil prices surged higher after the OPEC+ production group agreed to raise output at a substantially smaller pace than that seen earlier this year.
At 03:02 ET, Brent futures gained 1.7% to $66.64 a barrel, and U.S. West Texas Intermediate crude futures rose 1.8% to $63.00 a barrel.
The Organization of Petroleum Exporting Countries and allies, known as OPEC+, agreed on Sunday to raise production by a cumulative 137,000 barrels per day in October, much lower than monthly hikes of about 555,000 bpd and 411,000 bpd in earlier months.
The cartel’s latest hike comes after it began steadily raising production earlier this year, as leader Saudi Arabia sought to regain market share to offset deteriorating oil prices.
Source :
https://www.investing.com/news/stock-market-news/european-stocks-rose-on-increased-fed-cut-hopes-french-politics-in-spotlight-4228103
