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What has happened
Equities saw a market rally ‘baton’ pass from the US to Europe yesterday. While the US S&P500 equity index dropped -0.19% on Thursday closing lower for the first time in five sessions, the pan-European STOXX600 equity index was up +0.40% and gaining for a sixth consecutive session. Within the equities market, megacap technology stocks led, with the ‘Magnificent Seven’ tech group (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA and Tesla) up +0.38% to hit another fresh record high (all performance data in local currency price return terms).
US jobs data due
Today at 1.30pm UK time, we get the latest US ‘non-farm payrolls’ employment data for November. The median Bloomberg analyst survey estimate is for a gain of 220,000 jobs last month, but which follows a weather-impacted 12,000 gain from October. The median forecast for the unemployment rate is for an unchanged rate of 4.1%. Today’s jobs data is the last set before the US Federal Reserve meets later this month (17-18 December) to decide on interest rates in its last meeting of the year.
Hopes for a French budget compromise
Yesterday saw outgoing French Prime Minister (PM) Michel Barnier officially resign, having lost a vote of no-confidence earlier this week – he now takes on a caretaker role until the next PM is appointed. The fall in the government was triggered by a failed attempt to push through a 2025 French government spending budget plan. More positively however, and suggesting chances for a compromise ahead, the latest news is that French far-right ‘National Rally’ party leader, Marine Le Pen, has said in an interview that she could help pass a budget in “a matter of weeks” if the next PM was prepared to cut the deficit at a slower pace.
What does Brooks Macdonald think
Events this week in France have not shown yet any meaningful signs of a risk of contagion across to broader European regional markets. As a case in point, yesterday both the Italian and the Spanish 10-year government bond yield spread premiums over their German equivalent reached their tightest levels in three years. It suggests that while the French government’s inability so far to agree on a budget plan is unsettling for investors, we are still a long way away from this morphing into a repeat of a ‘2008-2012 eurozone sovereign debt crisis’ style episode.
Source: Brooks Macdonald
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