FRANKFURT (dpa-AFX) - The approaching "Day X" in the U.S. debt dispute could put even more pressure on financial markets in the new week than recently. Thursday is the day: "If Democrats and Republicans do not get their act together (by then), the United States will run out of money," writes equity strategist Frank Klumpp of Landesbank Baden-Württemberg (LBBW). "For the time being, therefore, the name of the game is to go on the defensive."
DekaBank's chief economist Ulrich Kater also warns, "From the point of view of market participants, the risk of an unprecedented U.S. default is noteworthy, so they are holding their breath." This does not bode well for the Dax, although the German benchmark index has already retreated somewhat from its recent record high of 16,331 points.
Next Friday, the second important weekly event is on the agenda with the monthly U.S. labor market report - it is a decisive factor for the interest rate policy of the U.S. central bank Fed. According to the minutes of the latest interest rate meeting at the beginning of May, no clear monetary policy course is currently emerging.
An agreement on raising the debt ceiling and the U.S. employment trend are likely to be all the more important for the next interest rate meeting in mid-June. In view of the significant tightening of monetary policy since March 2022 in the fight against inflation, observers are currently most likely to expect a pause in interest rates.
Because of the steep increase, fears have been doing the rounds for some time that the U.S. economy could slide into recession this year. Just a few weeks ago, market turbulence caused by the problems of several U.S. specialty and regional banks as a result of high interest rates had also worried investors. These had spilled over into Europe and dragged the major Swiss bank Credit Suisse into the abyss. On this side of the Atlantic, too, the economy is giving enough cause for concern. It was recently announced that Germany, Europe's largest economy, unexpectedly slipped into recession in the first quarter.
Due to the uncertainty about the persistent inflation and the economic framework conditions, the capital markets have been trapped in a broad sideways movement for quite some time, Claudia Windt of Landesbank Helaba recalled. This is also evident in the Dax, which after a brief period of strength and the resulting record high quickly slipped back into the trading range of previous weeks. The situation is not much different for the Eurozone's leading index, the EuroStoxx 50 - except that, unlike its German counterpart, it is far from a new record high. Accordingly, apart from the U.S. labor market report, some other economic data should be worth a look.
The new week begins - apart from possible headlines on the pending agreement in the U.S. debt dispute - probably rather leisurely: On the German stock market is traded on Whit Monday, but not on several other stock exchanges. New York and London, for example, are celebrating a long weekend, and important economic data and corporate appointments are not on the agenda.
On Tuesday, the news situation is also still comparatively quiet. Announced are, among other things, the quarterly figures of the MDax-listed commercial real estate specialist Aroundtown, as well as data on economic and industrial confidence in the euro zone and consumer confidence in the United States. This will be followed in midweek by the quarterly report of the financial services provider Wüstenrot & Württembergische, purchasing managers' indices from China, an important market for Germany, and consumer prices from Germany.
Thursday at the latest will then be dominated by the U.S. debt dispute - irrespective of further purchasing managers' indices and the ADP report on employment trends in the U.S. private sector, which is regarded as an important indicator for the government's labor market report on Friday.
Experts at Italian bank Unicredit believe that Republican and Democratic negotiators will work through the extended Pentecost weekend to reach an agreement. But it would have to be in place by Tuesday at the latest to allow for quick ratification by Congress on Wednesday.
Economists at Swiss private bank J. Safra Sarasin believe a U.S. default is highly unlikely. But the risk of a government shutdown is very real, they said, and could have a significant impact on the world's largest economy. In the event of a failure of the negotiations, the Japanese yen would be the first choice as a hedging instrument. In addition, the Sarasin experts recommend gold and the Swiss franc.
On Friday, the news agenda looks quite clear - apart from the U.S. labor market report. At electronics retailer Ceconomy, a capital market day could move the share price./gl/edh/men
--- By Gerold Lohle, dpa-AFX ---
