Futures Flat, Dollar Jumps As French Political Turmoil Returns

Futures are lower to start the new month as the US Dollar pushed higher, partially in response to Trump’s mandate that BRICS drop non-USD FX ambitions but also because the crisis swirling around the French government deepened, dragging on the euro. As of 8:00am ET, S&P futures are down 0.1%, but well off session lows, even as data showed Black Friday sales grew at a faster pace in the US this year; Nasdaq 100 futures are flat. The muted action comes after the S&P recorded its strongest month of the year, rising +5.7%, and is up 8 of the past 9 days. Pre-market, Mag7 are mixed, Semis are weaker, and Software is stronger; Financials are flat. Treasuries fall as traders prepare for US data that may influence the outlook for interest rates. Crude oil is higher, leading Energy to outperform the rest of the commodity complex which is seeing weakness in Ags and Precious. Today’s macro data focus is on ISM-Mfg and Construction Spending but the key this week is Friday’s NFP print to shape Dec Fed rate cut expectations.

In premarket trading, Stellantis fell 9% after CEO Carlos Tavares’s surprise departure leaves the maker of Jeep SUVs and Peugeot cars without clear leadership at a time of significant upheaval in the industry. Here are some other notable premarket movers:

• Cloudflare rises 4% after Morgan Stanley turns bullish on the stock, saying the software maker can “sustain, if not accelerate, topline growth over the next few years.”
• Core Scientific drops 4% following an announcement that the Bitcoin miner intends to offer $500 million in convertible notes via a private offering.
• Gap gains 4% after JPMorgan upgraded its rating on the apparel retailer, saying  the foundation has been set to support a “consistent playbook of improved merchandising and marketing.”
• Toast slips 2% as Goldman Sachs stepped away from its buy rating, citing an elevated valuation following a recent rally.
• Upstart Holdings (UPST) drops 5% after JPMorgan downgraded the consumer finance firm, a move that’s based on valuation as shares appear to be “priced for perfection.”

“A Trump presidency is going to put upward pressure on the US dollar given some of the policy stance, the tariffs and others, that he’s been talking about,” said Jun Bei Liu, a portfolio manager at Tribeca Investment Partners Pty Ltd.

In Europe, the Stoxx 600 reversed an earlier decline to rise 0.3%. The yield premium on 10-year French debt over its German counterpart has widened ~4 bps versus Friday’s close. French stocks and government bonds have recovered off their worst levels but still underperform their regional peers after the far-right National Rally indicated in the strongest language yet that it could topple the government. The CAC 40 index was down 0.4% after falling more than 1% at the open, and the euro slumped. Among individual stocks, Stellantis sinks after announcing its CEO is departing. Top gainers include Portugal’s Galp after successfully drilling a Namibian well and Akzo Nobel following a broker upgrade. Here are the biggest movers Monday:

• Galp rises as much as 4.4% after the Portuguese oil company said after the close of trading on Friday that it successfully drilled the Mopane-1A appraisal well in block PEL83 in Namibia
• Akzo Nobel gains as much as 4.1% after JPMorgan lifted the firm and Air Liquide and Akzo Nobel to overweight and Johnson Matthey to neutral in a European chemicals outlook note
• Fresenius Medical Care shares gain as much as 3.3%, among the top performers in Europe’s Stoxx 600 Index on Monday morning after BofA upgraded its recommendation on the stock to neutral
• Rockwool gains as much as 2.1%, rallying from last week’s post-results slump, as Danske Bank upgrades the insulation firm to buy and sees an opportunity to “take advantage of the dip”
• Burberry gains as much as 1.8% as Deutsche Bank upgrades to buy from hold as analysts reshuffle their ratings of European luxury, sporting goods and apparel stocks into 2025
• Icade gains as much as 6.8% after the commercial property investor boosts its full-year cash flow forecast; it now sees group net current cash flow per share high end of EU3.78 to EU3.93
• Holcim shares gain as much as 1.1% after the firm announced plans to sell its Nigerian operations over the weekend, a move that is part of the company’s portfolio simplification strategy
• Stellantis shares fall as much as 8.9% in Milan to their lowest intraday value since July 2022 as CEO Carlos Tavares’s early exit leaves the automaker without clear leadership at a difficult moment
• Delivery Hero shares fall as much as 10% after the food delivery company said its Spanish arm Glovo will hire riders as employees rather than freelancers
• Shares in French banks and financial stocks fell on Monday as Prime Minister Michel Barnier faces the risk of seeing his government toppled by a no-confidence vote later this week
• K+S falls as much as 4% after Deutsche Bank downgrades the German agricultural chemicals firm to sell, citing risks around potash pricing as well as concerns about free cash flow

“There’s certainly a political instability and the securities, the French government bonds, are pricing that instability,” Ecaterina Bigos of AXA Investment Management told Bloomberg TV. “Political instability creates uncertainty, but what is more important is what is France going to do to bring that deficit down?” 

Earlier in the session, Asian stocks gained, supported by signs of economic stabilization in China while a rally in tech stocks mirrored similar gains in the US. The MSCI Asia Pacific Index rose as much as 0.9% to head for highest level since Nov. 11, with benchmark heavyweights like TSMC, Hitachi and Toyota Motor leading the advance. A gauge of technology stocks was the index’s best sector performer. Chinese shares in Hong Kong and the mainland rose as new data showed better-than-expected improvement in manufacturing activity, an indication that the economy may be further stabilizing after Beijing began introducing a stimulus package in September. Japan’s Topix gained, led by banks, after Bank of Japan Governor Kazuo Ueda said interest-rate hikes are “nearing” as inflation and economic trends develop in line with the central bank’s forecasts.

Modest strength “in HK and China markets is a mix of factors,” said Billy Leung, an investment strategist at Global X ETFs in Sydney. “Positive economic data, such as OK PMI figures, has provided support.” Tech sector gains are a follow-through from last week as US curbs on sales of chip technology to China seem “to be softer than anticipated,” he added.

In FX, the Bloomberg Dollar Spot Index rose 0.5% after US President-elect Trump threatened the BRICS nations with tariffs if they sought to create a new currency as an alternative to using the greenback; the EURUSD fell 0.6% after France’s far-right party threatened to topple the government amid a stand-off over the nation’s budget. French bonds and stocks lagged behind European peers.

In rates, treasuries are also weaker after gapping lower at the Asia open, erasing a portion of Friday’s late rally that was aided by month-end index rebalancing. Yields are 2bp-4bp higher across a flatter curve after ending November at monthly lows, with 5-, 10- and 30-year below 200-day average levels for first time since late October. US 10-year yields higher by 4 bps to 4.21%. With no coupon auctions slated until Dec. 10, focus is on the first major economic indicators for November — including ISM manufacturing Monday and employment report Friday — along with comments by Federal Reserve officials including Chair Powell Wednesday, as a Dec. 18 rate cut is only about half priced into swaps.

The treasury market ended November with a 0.78% gain after benchmark yields retreated from multimonth highs reached in the days following the Nov. 5 US presidential election; market-implied odds of a Federal Reserve interest-rate cut in December rebounded to about 60% Friday.

In commodities, oil prices advanced, with WTI rising 0.8% to $68.60 a barrel. Spot gold fell $6 to $2,637/oz. Bitcoin falls 3% to near $95,000.

Looking at the US economic data calendar we get November final S&P Global US manufacturing PMI (9:45am) and October construction spending and November ISM manufacturing (10am). Fed speaker slate includes Governor Waller (3:15pm) and New York Fed President Williams (4:30pm)

Market Snapshot

• S&P 500 futures down 0.2% to 6,040.75
• STOXX Europe 600 little changed at 509.87
• MXAP up 0.9% to 185.02
• MXAPJ up 0.6% to 580.18
• Nikkei up 0.8% to 38,513.02
• Topix up 1.3% to 2,714.72
• Hang Seng Index up 0.7% to 19,550.29
• Shanghai Composite up 1.1% to 3,363.98
• Sensex up 0.6% to 80,267.89
• Australia S&P/ASX 200 up 0.1% to 8,447.85
• Kospi little changed at 2,454.48
• German 10Y yield little changed at 2.06%
• Euro down 0.6% to $1.0515
• Brent Futures up 1.0% to $72.55/bbl
• Gold spot down 0.2% to $2,636.55
• US Dollar Index up 0.51% to 106.28

Top Overnight News

• US President-elect Trump demanded that BRICS nations commit to not creating a new currency to challenge the US dollar or they will face 100% tariffs. Trump also stated that he had a very productive meeting with Canadian PM Trudeau and they discussed many important topics that will require both countries to work together to address such as fentanyl and the drug crisis, while they also spoke about many other important topics like energy, trade and the Arctic. In the European morning, South Africa said the BRICS have no plans to create a new currency: BBG
• Joe Biden issued a pardon for his corrupt crackhead son Hunter Biden.
• China's factory activity expanded at the fastest pace in five months in November as new orders, including those from abroad, led to a solid rise in production, pushing manufacturers' optimism degree to an eight-month high, a private-sector survey showed on Monday. China’s Caixin manufacturing PMI for Nov comes in ahead of expectations at 51.5 (vs. the Street 50.6 and up from 50.3 in Oct). Reuters
• China bonds rallied Monday with the 10-year yield dropping below 2% to hit a multi-decade low, amid expectations that Beijing could expand its stimulus measures to shore up the economy. Yields on China’s 10-year government bond fell to 1.9636% on Monday, its lowest level in 22 years. CNBC
• China warned the US to tread cautiously on the issue of Taiwan after President Lai Ching-te landed in Hawaii on his first stopover on American soil. China also vowed strong measures to counter any US weapons sales to Taiwan. BBG
• ECB’s Lane says monetary policy should focus on upcoming risks rather than backward-looking economic data. FT
• Exporter’s from China, Canada, and Mexico are seeking to front-load shipments to the US after Donal Trump pledged to impose new levies on goods from the 3 countries on his first day in office. At a supply chain expo in Beijing last week, logistics company representatives said the number of customers asking about bringing forward shipments increased following Trump’s threat to impose an extra 10 cent tariff on Chinese goods. FT
• Canada will step up border enforcement in a “visible and muscular way,” a top official said, as it tries to prevent US tariffs. New border resources may include more drones, helicopters and staff. BBG
• The US unveiled new restrictions on China’s access to vital components for chips and AI, escalating a campaign to contain Beijing’s technological ambitions. It also blacklisted 140 more Chinese entities. BBG
• BlackRock is nearing a deal to buy HPS, people familiar said. The deal may come this week and value the private credit manager at $12 billion or more. BBG
• Consumer spending on Black Friday rose 3.4% Y/Y overall, with healthy online sales (+14.6%) and muted in-store expenditures (+0.7%). Reuters

A more detailed look at global markets courtesy of Newsquawk

APAC stocks began the new trading month mostly higher as participants reflected on Chinese PMI data in which the official headline Manufacturing and Caixin Manufacturing PMIs both topped forecasts, while markets await a deluge of releases this week. ASX 200 eked mild gains with outperformance in tech making up for the slack in defensives and with data providing some  encouragement. Nikkei 225 saw two-way price action but ultimately gained with the help of a weaker currency and encouraging Chinese data. Hang Seng and Shanghai Comp were varied with outperformance in the mainland following the latest Chinese PMI data including the official releases over the weekend which showed headline Manufacturing PMI topped forecasts but Non-Manufacturing PMI disappointed, while Caixin Manufacturing PMI surpassed the most optimistic analyst expectations and printed its highest since June.

Top Asian News

• US will add roughly a dozen Chinese toolmakers plus their subsidiaries and affiliates to the Commerce Department’s restricted trade list, while it will expand its powers to curb exports of certain chipmaking equipment made in places including Malaysia, Singapore, Taiwan, and Israel, according to sources cited by Reuters.
• BoJ Governor Ueda said on Friday that the timing of the next interest rate hike was "approaching" as the economy was moving in line with the central bank's forecasts and noted that yen weakness will be a risk to the outlook if the currency falls further after inflation starts rising, while he added the BoJ is to focus on wages and other areas when deciding whether to hike interest rates, according to Nikkei.
• Japan reportedly wants to lift GPIF real investment return target to 1.9% from 1.7%, according to Bloomberg.
• PBoC Governor says China will continue to maintain a supportive monetary policy stance and direction next year; will strengthen counter cyclical adjustments

European bourses began the session entirely in the red, but quickly after the cash open most indices caught a bid to display a mostly positive picture in Europe. The CAC 40 (-0.4%) is the underperformer given the political uncertainty surrounding the region. European sectors opened with a strong negative bias, but sentiment has since improved to show a mixed picture in Europe. Basic Resources takes the top spot, despite losses in base metals prices; sentiment in the sector might be buoyed by better-than-expected Chinese NBS & Caixin Manufacturing PMIs. Autos is by far the clear underperformer, dragged down by losses in Stellantis after its CEO Tavares resigned. US Equity Futures are very modestly on the backfoot, giving back some of the gains seen in the prior session which saw the S&P notch its best month of the year.

Top European News

• ECB's Lane said while inflation had fallen close to the ECB’s target of 2%, there is a little bit of distance to go and while data dependence falls down in priority, the new challenge would be assessing the incoming risks on a meeting-by-meeting basis. Lane said the focus on the latest economic data will ebb and monetary policy decisions at some point in the future need “to be driven by upcoming risks rather than being backward-looking”. Furthermore, he said services inflation needs to come down further and at some point, there will be a transition from addressing the disinflation challenge to the new challenge of keeping inflation at 2%, according to FT.
• ECB's Stournaras says the ECB will probably continue cutting rates in December.
• ECB's Kazaks says the ECB is likely to discuss a bigger December cut, but the uncertainty is high
• French far-right figurehead Marine Le Pen said on Sunday that the government effectively "put an end to discussions" on the country's 2025 budget, which increases the likelihood of a vote of no confidence in PM Barnier, according to France 24

Fixed Income

• OATs are firmer but have pulled back from a 127.04 session peak, in-fitting with action across benchmarks broadly in recent trade. Focus on the region is on French politics and particularly how PM Barnier will outline social security budget details to the National Assembly today as part of the budget, a budget which would almost certainly not pass due to it containing RN red lines. OAT-Bund 10yr yield spread has peaked at 86bps thus far today, elevated but shy of the 90bps high from last week.
• Bunds are firmer but off session highs of 135.40. Been on the front foot throughout the morning, given the above French political concern on the narrative that it could potentially spill over into a broader fiscal/economic crisis with implications for the bloc as a whole. This morning's PMIs were generally revised lower (though the pan-EZ figure was unrevised); metrics which had little impact on price action. Thereafter, ECB's Kazaks said the ECB is likely to discuss a bigger December cut, but the uncertainty is high; comments which sparked upside in Bunds.
• Focus for USTs ahead, aside from France, is firmly on ISM Manufacturing PMI ahead of the services release later in the week and then most pertinently the NFP report. Currently trading at the lower end of a 110-31+ to 111-06+ band.
• Gilts were initially firmer, taking the lead from EGBs and with further modest upside coming after a downward revision to its Final Manufacturing PMI. However, Gilts have faded from the 96.25 peak which printed early doors with specifics light, aside from data, and the focus very much on the EZ/France.

Commodities

• WTI and Brent are in the green, just off session highs of USD 68.81/bbl and USD 72.67/bbl respectively. Upside which comes after strong Chinese PMIs overnight and ahead of this week’s delayed OPEC+ gathering, currently set for December 5th.
• Gold was pressured despite uncertainty around France and geopolitical tensions with the USD firmer and stripping the yellow metal of any haven-allure it may have otherwise received. XAU peaked at USD 2656/oz peak, shy of last Wednesday’s USD 2658/oz high.
• Base metals are softer, dented by the USD strength and despite better-than-expected Chinese PMIs. 3M LME Copper continues to slip below the USD 9k handle down to a USD 8910/z trough.
• Kazakhstan says oil supplies via Druzhba pipeline to Germany were fully on schedule in November.

Geopolitics: Middle East

• US envoy Hochstein says there are Israeli violations of the ceasefire agreement, according to Kann's Stein.
• Syrian opposition leader Al-Bahri says "we are ready to negotiate, starting tomorrow".
• Russian Kremlin says the continue to support Syrian President Al-Assad, are analysing the situation.
• Israeli Foreign Minister says "The presence of Hezbollah terrorists south of Litani - a fundamental violation of the agreement. They must move north!", according to Kann's Stein
• Israeli PM Netanyahu told the mother of a hostage that conditions are ready to complete a deal in Gaza after the end of the war in the north, according to Israel's Channel 12 cited by Sky News Arabia. It was also reported that Netanyahu decided to hold a security discussion on Sunday evening with the aim of reaching a deal in Gaza, while the security service warned the government that the army's continued dismantling of Hamas could lose control of the hostages, threatening their return due to the chaos.
• Israeli Foreign Minister said there are signs of progress on a deal with Hamas in light of flexibility that arose after the settlement in Lebanon, while the Israel Broadcasting Corporation reported that Hamas still insists that any agreement must ensure an end to the war, according to Sky News Arabia.
• Israel’s military said sirens sounded in a number of areas in central Israel following a launch from Yemen.
• UNRWA chief said aid delivery through the Israeli-controlled Kerem-Shalom crossing was paused due to an unsafe route and looting by armed gangs inside Gaza.
• Syrian opposition forces have taken control of much of the country’s second-largest city Aleppo, while rebel forces said all of Idlib province is under rebel control.
• Syrian and Russian air forces stepped up strikes on the positions of Syrian rebels and their supply lines with scores reportedly killed and injured, according to TASS citing the Syrian army.
• US-led international coalition forces launched two airstrikes against the positions of Iran-aligned forces in the suburbs of Syria’s Mayadeen, according to Syrian television cited by Iran International.
• Iran’s Foreign Ministry condemned aggression against its embassy in Aleppo and said all consulate members are safe, while the Iranian and Russian Foreign Ministers voiced support for Syria in confronting terrorist groups. Furthermore, the Iranian Foreign Minister said rebel attacks in Syria are part of an Israeli-US plan to destabilise the region.
• Turkey’s Foreign Minister spoke with US Secretary of State Blinken and discussed Syria, while the Turkish official also discussed Syria with his Iraqi counterpart.

Geopolitics: Ukraine

• Ukrainian President Zelensky met with EU Council President Costa in Kyiv, while he said a NATO invitation is necessary for survival and that Ukraine will never recognise Russian occupation of its territory.
• White House National Security Adviser said the idea of returning nuclear weapons to Ukraine is not under consideration.

Geopolitics: Other

• US State Department said it suspended the strategic partnership with Georgia and regrets Georgia’s decision to suspend EU accession. It was separately reported that Russian Security Council Deputy Chairman Medvedev said an attempted revolution is happening in Georgia and that Georgia is moving along the Ukrainian path into the abyss.
• China’s government said the Foreign Ministry lodged stern representations with the US over Taiwan President Lai’s Hawaii stopover and they are firmly opposed to Taiwan leaders transiting the US for any reason. China’s Foreign Ministry also lodged stern representations with the US over weapons sales to Taiwan and said it will take resolute countermeasures regarding the arms sale.
• Philippines President Marcos said the reported presence of a Russian submarine in the South China Sea is very concerning and any intrusion into the Philippine maritime zone is very worrisome.

US Event Calendar

• 09:45: Nov. S&P Global US Manufacturing PM, est. 49.0, prior 48.8
• 10:00: Oct. Construction Spending MoM, est. 0.2%, prior 0.1%
• 10:00: Nov. ISM Employment, prior 44.4
• 10:00: Nov. ISM Prices Paid, est. 56.0, prior 54.8
• 10:00: Nov. ISM New Orders, prior 47.1
• 10:00: Nov. ISM Manufacturing, est. 47.6, prior 46.5

Central Bank speakers

• 15:15: Fed’s Waller Gives Keynote at Fed Framework Conference
• 16:30: Fed’s Williams Gives Keynote Remarks

DB's Jim Reid concludes the overnight wrap

Given it’s the start of the month, we’ve just released our usual monthly performance review for November. For the month as a whole, US markets saw a strong out-performance, with the S&P 500 up to a new record and posting its strongest monthly performance of 2024. European sovereigns also did well as investors priced in faster rate cuts from the ECB. But there were a few weaker spots, with French assets underperforming given the country’s budget situation, whilst the Euro posted its largest decline against the US Dollar in 18 months as investors contemplated the prospect of further tariffs. Moreover, the dollar’s strength and weakness elsewhere meant that virtually all non-USD denominated risk assets were negative in the month in USD terms.

Staying with performance themes, on Saturday it was two years since ChatGPT was launched and I don't think it's an understatement to say the +183% gain for the Mag-7 since then, and the +48% increase for the S&P 500, might have played a significant part in the US avoiding a recession when the pressures in that direction were most acute. Financial conditions and the wealth effect have a big impact on the US economy. Who knows what would have happened if ChatGPT hadn't been launched then and the technology didn't emerge for a couple of years. For the record Nvidia is up a cool 717% since then.

Over the weekend Mr Trump has been active on social media with a warning to the BRICS countries that any attempt to replace the Dollar will see them face 100% tariffs. As ever with Mr Trump it seems to be a shot across the bows but likely wouldn't ultimately be great for the US economy if implemented. As we mentioned last week a 25% tariff on Mexico and Canada could lift US inflation by around one percent in 2025 so this felt like an opening salvo to negotiations and indeed Trump spoke to Sheinbaum last Wednesday and had dinner with Trudeau on Friday. The former meeting discussed flows of migrants and the latter the Fentanyl coming in through the Canadian border. The mood music after both contacts seemed positive so the dance of tariff threats and then negotiations has already started. Expect a lot more of this over the months ahead. With regards to the BRICS comments, it seems to further point to Dollar strength being a theme of the new administration as against Trump 1.0 where initially they tried to talk the Dollar down. The Dollar index is up +0.5% this morning in Asia.

Another interesting weekend development was Zelenskiy being open to a cease-fire that ceded control of land it has lost to Russia in return for NATO security guarantees over the remainder of the country. Although such a guarantee would be difficult to negotiate it does show that as Trump nears the office, the direction of travel will likely move towards peace talks even if the war escalates in the background as both sides try to strengthen their hands ahead of the inauguration.

As we start a new month (with Liverpool 9 (nine) points ahead at the top of the Premier League), it is set to be a busier week after the lull of Thanksgiving, with a lot of focus on various important US employment data culminating in payrolls on Friday, a number that could influence the fairly tight December 18th Fed decision. The US ISM indices (today and Wednesday), some global PMIs, and the University of Michigan's consumer survey (Friday) are also due with inflation expectations within the survey fascinating after last month saw the joint highest (3.2%) for the 5-10yr expectations series since 2011. From central banks, speakers include Fed Chair Powell and ECB President Lagarde (both Wednesday).

In terms of the US employment data, DB's forecast for Friday's payrolls is +215k (consensus +200k) with private payrolls at +185k (consensus +200k). Last month the data printed at +12k and -46k, respectively, with weather and strikes impacting the numbers. For private payrolls it was the first negative print since December 2020 during the winter Covid wave. The US econ team's forecast assumes 75k of positive payback split equally between weather and returning strikers. DB and consensus expect the unemployment rate to hold at 4.1%. Prior to this we have JOLTS (tomorrow), ADP (Wednesday) and the employment components of today manufacturing ISM and Wednesday's services equivalent. JOLTS is always one month behind payrolls (e.g. October) so it will be influenced by the weather disruptions we had that month.

Over in Europe, a number of economic activity indicators are due for the main economies including factory orders (Thursday), industrial production and the trade balance for Germany (both Friday). Industrial production (Thursday) and the trade balance (Friday) are also due for France. Otherwise there will also be November CPI prints in Switzerland (Tuesday) and Sweden (Thursday).

In Asia, Japan's wages and consumption activity are out on Friday. In Australia, Q3 GDP will be released on Wednesday (our economists preview it here). Briefly rounding off with geopolitics, South Africa took over the G20 presidency from Italy yesterday and the OPEC and non-OPEC ministerial meeting (online) will be held on Thursday as supply remains in focus.

Also watch France today as the National Assembly starts to review social security within the budget bill. If Barnier uses article 49.3 to push through the bill without a vote, it is feasible a no-confidence motion could come as early as today if the premier doesn't take into account the demands of the far-left and far-right. Le Pen in particular has been very hawkish over the weekend, suggesting that her extra budget demands need to be met today.

Asian equity markets have started the final month of 2024 on a positive note, following another record high on Wall Street on Friday with China’s surprisingly strong PMI data also supporting risk sentiment. As I check my screens, Chinese stocks are among the best performers with the Shanghai Composite (+1.03%) leading gains while the CSI (+0.70%) and the Hang Seng (+0.23%) are also trading in positive territory. Elsewhere, the Nikkei (+0.72%) and the KOSPI (+0.42%) are also trading higher. S&P 500 (-0.17%) and NASDAQ 100 (-0.16%) futures are moving lower though and 10yr UST yields are +4.6bps higher after a strong rally last week.

Coming back to China, manufacturing activity continued to expand among smaller manufacturers in November after the Caixin/S&P Global manufacturing PMI came in at 51.5, hitting a 5-month high and beating Bloomberg’s median estimate of 50.6 and picking up from the prior month’s 50.3. This private gauge comes after the official PMI data, released on Saturday, also expanded to 50.3 in November from 50.1 the previous month. Meanwhile, Chinese 10yr sovereign bond yields fell below 2% per cent during early trading, its lowest level in more than two decades on rising speculation that the PBOC would ease monetary policy further. China’s long-term sovereign bond yields (30yr bonds) have been declining all year and on Friday went below Japanese yields for the first time.

Looking back at last week now, and the S&P 500 climbed to a new record by the end of the holiday shortened week (a +1.06% gain over the week, +0.56% Friday). Outside the US, the story was a lot less rosy as President-elect Trump announced he was planning to impose tariffs on China, Canada and Mexico. Europe’s STOXX 600 managed to eke out a +0.35% gain (+0.58% Friday), but other markets were softer with the Nikkei falling -0.20% (-0.37% Friday) and the MSCI EM index down -0.80% (-0.10% Friday).

For sovereign bonds though, the picture was a lot more positive, with Treasuries rallying following Scott Bessent’s nomination as the next US Treasury Secretary. By Friday, that meant the 10yr Treasury yield was down -23.2bps over the week (-9.5bps Friday). Yields on 10yr bunds also fell back as the German inflation reading came in beneath expectations, falling back -15.5bps last week (-3.9bps Friday) to 2.09%, which is their biggest weekly decline since the market turmoil at the start of August.

Otherwise last week, there was a clear underperformance among French assets given the budget situation and speculation about the government’s survival. That meant the CAC 40 lost ground for a 6th consecutive week, falling by -0.27% (+0.78% Friday). Moreover, the Franco-German 10yr spread widened by +0.4bps over the week to 80.6bps, albeit off the mid-week highs when it approached 88bps.

Finally, oil prices fell back, in part because of the agreement of a ceasefire between Israel and Hezbollah. By the close on Friday, Brent crude was down -2.97% over the week (-0.46% Friday) to $72.94/bbl. And those losses were echoed among other commodities, with gold down -2.69% (+0.20% Friday) to $2,643/oz.