In France, political turmoil continues as the government struggles to approve a budget. Also, a look at US macro data.
France – Budget drama to carry on
In France, political turmoil continues as the government struggles to approve a budget. As Marine Le Pen’s National Rally asks for more concessions on the bills introduced in the budget document, Prime Minister Barnier risks a vote of no-confidence in December, as a last resort attempt to pass a budget in 2024. A no-confidence vote would trigger a government reshuffle, with President Macron forced to create another government in early 2025 and the budget process delayed by at least a quarter. It is hard to call for timing of a budget approval, but it is likely that the outcome will be worse than expected. As giving concessions to each party is the only way to create consensus, the 2025 deficit may end up well north of 5%. This would trigger more domestic outflows and potentially rating downgrades down the line. While OATs reached five-year wides vs bunds, we expect pressure on French assets to remain elevated over the coming months.
US – Mind the data
This week, the focus will be on US macro data. On Monday, ISM data will inform us on how November macro is shaping up. Labor market data will be key in the second part of the week. Friday’s November Non-Farm Payroll is expected at 200k, a level that would leave the door open for a Fed cut the subsequent week. We think a cut in December is still the base case, but the central bank will use the meeting as an opportunity to guide markets towards a slightly more hawkish stance compared to November communication.
Algebris Investments’ Global Credit Team
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