Overview

• Germany's likely next chancellor, Friedrich Merz, announced plans to bypass the constitutional debt brake, enabling increased defense and infrastructure spending.
• The yield on Germany's 10-year bonds saw its largest single-day jump since 1990, with broader increases in borrowing costs across Europe and globally.
• The European Central Bank is expected to announce a rate cut, but rising inflation expectations have complicated monetary policy decisions.
• Germany's fiscal policy shift is seen as a historic departure from its traditional debt constraints, raising both growth prospects and concerns about rising debt levels.
• The euro strengthened against the dollar, while European equities, led by Germany's DAX index, surged on optimism about the economic impact of increased spending.