Preliminary agreement in the US debt dispute could calm stock markets

Preliminary agreement in the US debt dispute could calm stock markets

2023-05-28 16:38:52

DThe provisional agreement reached over the weekend in the US debt dispute could provide some relief for investors in the new trading week. The impending insolvency of the world’s largest economy had recently put pressure on stock markets worldwide and pushed the Dax below its recent record high of 16,331 points.

US President Joe Biden and Republican Kevin McCarthy announced a preliminary agreement in Washington on Saturday (local time). A default by the United States is thus likely to have been averted. The project still has to be approved by Congress.

Expert Thomas Altmann from QC Partners warned against too much euphoria: “It’s still too early for a final sigh of relief. But it’s time to take a deep breath.” Despite the agreement, investors shouldn’t expect any big price jumps. “Because the emerging agreement has recently been gradually priced in, especially on the stock and bond markets.”

creditworthiness was threatened

The dispute had meanwhile threatened the creditworthiness of the USA. The rating agency Fitch retained the top rating “AAA” for the world’s largest economy on Wednesday evening (local time), but lowered the outlook for creditworthiness to “negative”, so that a downgrade could be threatened.

The months-long dispute had brought the United States to the brink of insolvency. If this had actually happened, a subsequent global financial crisis could have triggered a sharp economic downturn. Millions of people could have lost their jobs as a result.

US jobs report is out on Friday

Even if the final agreement is reached in time, investors will have little time to catch their breath. Because already on Friday, the monthly US labor market report is the second important weekly event on the agenda – it is an important factor for the interest rate policy of the American Federal Reserve. In view of the significant tightening of monetary policy since March 2022 in the fight against inflation, experts are now most likely expecting an interest rate pause.

Apart from possible headlines on the way to the final agreement in the US debt dispute, the new week begins rather leisurely: On Whit Monday there will be trading on the German stock market, but not on a number of other stock exchanges. New York and London, for example, have a long weekend, and important economic data and company dates are not on the agenda either.

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