Stock Market

European Shares Inch Up on US Debt Deal Optimism

European stocks made slight gains on Monday as investors found reassurance in a preliminary agreement reached by American lawmakers to raise the debt ceiling and avoid a default. The pan-European STOXX 600 index saw a modest increase of 0.1%, with the oil & gas and real estate sectors leading the way in terms of gains.

Market activity remained subdued due to the closure of markets in the United States, the UK, and several European countries. Nonetheless, the budget agreement between US President Joe Biden and House Speaker Kevin McCarthy to suspend the $31.4 trillion debt ceiling until January 1, 2025, has instilled a sense of optimism. The deal is now slated to move forward for a vote in Congress.

Tim Waterer, Chief Market Analyst at KCM Trade, remarked that the duration of this optimism hinges on the smoothness of the upcoming stages of the process. Achieving approval from both the House and the Senate is no easy task, so traders are closely monitoring developments in Washington this week to gauge the level of negotiation and amendment required to secure the deal.

While European stocks enjoyed a rally in May, buoyed by positive earnings reports, concerns surrounding the US debt ceiling standoff and indications of a global economic slowdown have lately weighed on market sentiment.

SBB shares experienced a notable 7.4% jump from their record lows after the struggling Swedish real estate group announced an expanded strategic review that includes the potential sale of the entire company or certain business segments. Fitch downgraded the group’s credit rating to junk status last Friday, citing insufficient deleveraging.

In other news, Turkish President Tayyip Erdogan extended his two-decade-long reign in elections held on Sunday. This victory grants him a mandate to pursue increasingly authoritarian policies, which have polarized the country and solidified Turkey’s position as a regional military power. Consequently, Spain’s BBVA, one of the European companies most exposed to Turkey, saw a marginal decline of 0.4%, while the Paris-listed Lyxor MSCI Turkey ETF saw a modest increase of 0.8%.

Spain’s IBEX rose by 0.3% following the local elections, in which the conservative People’s Party (PP) emerged as a prominent force, displacing the ruling Socialists. Dissatisfaction with internal conflicts within Prime Minister Pedro Sanchez’s coalition government resonated with voters and influenced the outcome of the elections.

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