Stay updated with complimentary updates
Just sign up for the Global Economy myFT Digest — delivered straight to your email inbox.
Anticipated rebound in US job numbers as new figures are set to be released on Friday, providing insight for investors on interest rate trends leading up to the inauguration of president-elect Donald Trump.
According to economists surveyed by Reuters, it is expected that the US economy added 183,000 jobs in November, a significant increase from the previous month’s 12,000, which was affected by hurricanes and a Boeing strike.
Capital Economics’ assistant economist, Joe Maher, noted that the October figures were impacted by “temporary disruptions,” and a “soft non-farm payrolls print may also indicate some real weakness in the labor market,” potentially leading to further rate cuts by the US Federal Reserve.
Following Trump’s election win, investors have been speculating that the inflationary effects of his proposed tariffs and tax cuts could result in a slower rate cut by the Fed than previously anticipated.
The US central bank already lowered rates by 0.25 percentage points shortly after the election, bringing it to a range of 4.5 percent to 4.75 percent. Market indicators suggest a 65 percent likelihood of another quarter point cut at the upcoming Fed meeting.
Fed chair Jay Powell mentioned in a recent press conference that although the economy is showing signs of strength and low unemployment rates, the central bank faces challenges in balancing joblessness and inflation.
“With a suitable adjustment of our policy stance, we believe the economy and labor market can remain strong, while achieving sustainable inflation down to 2 percent,” Powell stated. Rafe Uddin
Can France stabilize investor confidence?
France’s political uncertainties are impacting its government bonds and stock markets, causing concerns about the fate of Michel Barnier’s crucial budget and his minority government.
The spread between France’s 10-year bond yield and the Eurozone benchmark, Germany’s, reached its highest level in 12 years last week at 0.9 percentage points. Paris briefly experienced higher borrowing costs than Greece, marking a significant event for both economies.
The Cac 40 stock index has also been underperforming compared to its counterparts, as the uncertain outlook is unsettling investors in major financial institutions and other companies exposed to the domestic economy and bond market.
This week may bring new challenges, with a social security vote that could lead to a vote of no confidence in Barnier. However, negotiations over budget areas between the government and Marine Le Pen’s far-right party could ease some political tensions.
Despite France’s government bond yields remaining historically low and relatively stable compared to other Eurozone countries, concerns persist about the impact of its deteriorating fiscal situation on the overall bloc. M&G Investments’ Robert Burrows warned about potential implications for the European Union as a whole.
“While the EU has overcome numerous challenges before, France’s ongoing struggles could reignite debates on fragmentation, endangering the unity that has been a cornerstone of the European project for decades,” he added. Ian Smith
Will Opec increase production this week?
Opec+, the oil cartel, is convening on Thursday to discuss the possibility of gradually increasing crude oil production or maintaining current levels.
In an effort to stabilize prices, the group, led by Saudi Arabia and Russia, has collectively implemented production cuts of around 5.86 million barrels a day over the past few years. While initially planning to unwind 2.2 million b/d of voluntary cuts from September, this decision was postponed due to weak oil demand from China and increased crude supply from non-Opec countries like the US. Analysts anticipate a further extension of the cuts for one to two months.
However, internal divisions within Opec may delay any production increase, especially until there is more clarity on how the incoming Trump administration will enforce crude sanctions on Iran and Venezuela. Despite the general consensus for an extension, there are concerns that Saudi Arabia, under oil minister Prince Abdulaziz bin Salman, could surprise the market by allowing production to rise. Malcolm Moore