The US added 227k jobs in November, in line with expectations of 220k, as employees returned from strikes and weather normalised. Also, a closer look at the ECB and the no confidence vote in France.
US Economics – Labour markets on track
The US added 227k jobs in November, in line with expectations of 220k, as employees returned from strikes and weather normalised. The unemployment rate rose by 0.1% to 4.2%, as the household survey showed continued weakness. The bounce-back in jobs was not enough to sway markets away from a December cut, now priced at 80%.
ECB – Dovish 25
The ECB will likely cut rates by 25 basis points to 3% and remove the tightening bias from their guidance. There has been no momentum among ECB council members to cut by more, despite weaker PMIs and slowing services inflation, and so the market prices <10% odds of a 50 basis points cut. The new forecasts will likely show lower inflation for 2024/25, and weaker growth for 2025/26.
France – No confidence
Last week Barnier lost the no confidence vote after he tried to push through a new budget without parliamentary approval. From here, the outgoing parliament remains in place with limited powers while Macron needs to find a new prime minister. There are no obvious candidates, and it previously took two months for Macron to select Barnier, so French noise may move to the background. Following the collapse of the government, French government bond spreads to Germany fell from highs of 0.88% to 0.76%.
Algebris Investments’ Global Credit Team
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