Fitch Ratings downgraded the French government’s credit rating on Friday, a warning sign for investors days after the ousting of the country’s prime minister who failed in his bid to bring down the ballooning budget deficit. Francois Bayrou lost a confidence vote this week after he proposed plans to slash 44 billion euros, or $51.8 billion, from the annual budget. The deficit reached 5.8% of domestic output last year, well above the 3% limit under European Union rules. President Emmanuel Macron later tapped Sebastien Lecornu, a centrist former defense minister, to replace Bayrou and try to break the deadlock in France’s fractured legislature. He is the fifth prime minister since Macron was re-elected in 2022. Fitch’s credit rating on French debt is now A+ with a stable outlook, from AA- previously, seven notches above junk. Fitch last downgraded France’s ability to pay its debts on time in April 2023, but gave it a negative outlook in October 2024. France’s debt continues to grow amid the political impasse, having reached 114% of gross domestic product. The country spends more paying interest on debt than on defense. Peer rating agencies Moody’s and S&P Global Ratings follow with their own rating decisions in October and November, respectively. Some downgrade risk was already priced into French government bonds, known as OATs, so the downgrade is unlikely to trigger forced selling, Deutsche Bank rate analysts said. However, the backdrop is unfavourable, with an overshooting deficit, political uncertainty is higher than before, and fiscal consolidation will be needed simply to keep the deficit from rising further, they said. Indeed, the difference—or spreads—in yields between OATs and the benchmark German government bonds has already widened due to the political crisis, ING economist Charlotte de Montpellier said. Still, it isn’t at levels seen during the eurozone’s sovereign-debt crisis of the early 2010s. The European Central Bank has tools to limit the excessive widening of government-bond spreads, and markets are well aware of this, she noted. “We think a full-blown crisis can be averted,” she added. France’s debt-to-GDP ratio is nevertheless lower than fellow eurozone nations such as Italy and Greece, as well as the U.S. Prime Minister Lecornu and his centrist bloc will now have to somehow pass a 2026 budget through a fragmented parliament split in three ideological directions. Parties on the left and far-right had argued President Macron should pick a prime minister from their ranks in order to bring about a consensus budget. Nationwide protests took place this week. Exacerbating the problem is the slowing of France’s economy, which has grown modestly this year but with household consumption stagnating and exports slumping in recent months due to U.S. tariffs on goods.

On Friday, the SMI lost 0.8 percent to 12,194 points and thus closed at a daily low. The 21 SMI values noted 12 price losers and 9 winners. 14.83 (previously: 15.61) million shares were traded. Company reports were in short supply at the end of the week. Analyst comments caused price movements. Novartis plunged by 2.9 percent and was thus the worst performer within the SMI. Goldman Sachs had rated the shares to "Sell" from "Neutral". Roche lost 1.5 percent, Nestlé fell 0.9 percent. Baloise declined by 0.4 percent. Baloise and Helvetia had received further approvals for their planned merger. As Baloise announced, the Swiss Competition Commission (WEKO) has granted its approval and the European Commission has completed the examination of the Regulation on Third State Subsidies (FSR). Upon successful finalisation of these approval procedures, Baloise and Helvetia have agreed to close the transaction on the 5th December 2025 - subject to all pending official approvals.

Europe
European markets stalled on Friday as investors await the Fitch agency's decision on France's note and are already looking at the Federal Reserve (Fed) meeting next week. The Stoxx Europe 600 index gave up 0.1%, to 554.8 points. In Paris, the CAC 40 finished virtually unchanged as did the DAX 40 in Frankfurt. In London, the FTSE 100 lost 0.2%. ROBERTET (+4.1%): the natural flavors specialist unveiled on Thursday evening a net result up 13.2%, to 58.5 million euros, in the first half of the year thanks to an improvement in its profitability, while confirming its organic growth target for the whole year. UBISOFT (-2.5%): the group is preparing to take the first step in its vast reorganization with the operational launch of a creative house dedicated to its flagship franchises on October 1st, according to an email sent Thursday evening to the employees of the video game publisher by its general manager, Yves Guillemot. VALLOUREC (+3.3%): the manufacturer of seamless tubes for the oil industry Vallourec announced Thursday evening that it had won a contract of up to $1 billion with the Brazilian oil giant Petrobras for offshore projects between 2026 and 2029.

United States
On Friday, the Nasdaq rose 0.4% to close at its 25th record of the year. The S&P 500 fell fractionally. The Dow Jones Industrial Average retreated 0.6%, dropping 274 points, after rallying above 46000 for the first time on Thursday. Thus, the Nasdaq composite closed the week at a record high, with investors placing bets that a likely interest-rate cut by the Federal Reserve will extend the market’s rally. The Nasdaq, along with the broad-based S&P 500 index, posted weekly gains of more than 1%. The Fed’s board of governors is expected to cut the benchmark rate by a quarter point during next week’s two-day policy meeting. Strong indicators of a continuing boom in artificial intelligence also helped push stocks higher. The Magnificent Seven group of tech giants— Amazon.com, Alphabet, Apple, Meta Platforms, Microsoft, Nvidia and Tesla —closed above the $20 trillion market-cap milestone for the first time on record, according to Dow Jones Market Data. Investors’ strong appetite for risk assets has fuelled a busy week of initial public offerings. Shares of Gemini Space Station, the crypto exchange controlled by the Winklevoss twins, surged 14% on its first day of trading on the Nasdaq. Optimism for a rate cut grew Friday after the University of Michigan’s consumer-sentiment index plunged to a four-month low. The worse-than-expected data revealed that long-term inflation expectations have risen as Americans’ confidence in the economy wanes. Rate futures indicate that traders view a quarter-point reduction as a virtual lock, while betting there is a small chance the Fed makes a half-point cut, according to CME data. Recent inflation and jobs data have made some investors cautious about the market and economic outlook. Those figures amplified concerns about a stagflationary environment characterised by slowing growth, persistent inflation and rising unemployment. Investors searching for safety and hedging against inflation flocked to gold, driving the precious metal to a record of $3,649 per troy ounce. In corporate news, shares in Warner Bros. Discovery jumped 17% after leaping on Thursday on a Wall Street Journal report that Paramount Skydance is preparing a bid.

Asia
The Japanese stock market is closed on account of Respect For The Aged Day on Monday. Elsewhere in Asia, China, Hong Kong, South Korea and Indonesia are higher by between 0.1 and 0.6 percent each, while New Zealand and Taiwan are down 0.4 and 0.7 percent, respectively. Malaysia and Singapore are relatively flat.

Bonds
Treasury markets cool off a little, sending yields higher, as markets wait for an expected restart of interest rate cuts by the Fed next week. The yield on the 10-year Treasury note, a key indicator of borrowing costs across the economy, edged higher to 4,066%.

Analysis
Vontobel cuts Helvetia to Hold (Buy) - 214 (213) CHF
Dt. Bank upgrades ABB to 47 (45) CHF - Sell
Vontobel lifts Baloise to 216 (210) CHF - Hold
Produced by MBI Martin Brückner Infosource GmbH & Co. KG on behalf of Swissquote. All news is acquired with journalistic accuracy. No liability is assumed for delays or errors.