The financial markets saw some reversal trends in currencies last week, with the US dollar weakening following a retreat in the US government bond yields. The trend may continue this week as investors reassess Trump’s tariffs and central banks’ rate path. 

The stock markets, particularly Wall Street, will likely extend gains toward a Christmas rally. Other regional markets often follow suit despite varying development according to different economic dynamics. 

This week, French political tensions and the US labour markets data are set to be in the spotlight for the financial market. 

Europe

The euro rebounded against the dollar despite the French government’s crisis. However, European bond markets arepricing in a 20% probability for a jumbo rate cut of 50 basis points by the European Central Bank (ECB) in December.

The single currency may face further pressure if bond tradersamplify bids. 

Market participants will continue to watch the French political drama and final manufacturing and services PMIs from major European economies. Risk sentiment recovered towards the end of the week after Prime Minister Michel Barnier made concessions to stave off the threat of a no-confident motion.

However, further challenges loom as the National Rally’s (NR) leader Le Pen called for more amendments, setting Monday as a deadline. This could bring significant movements in the French markets at the open. 

S&P Global will release the final manufacturing and services Purchasing Manager Index (PMIs) of major economies including France and Germany. In the flash data release, manufacturing activities in Germany improved slightly to 43.2 in November from 43 in October.

However, the data still implies deep contraction in the sector due to the weak economy and weak demand in China. Additionally, Germany’s services PMI returned to contraction for the first time since February. 

In France, business activities in the manufacturing and services sectors declined from the previous month, driven by political and economic uncertainty. Italy and Spain are also due to release PMI readings for November this week. 

United States

Markets will focus on key economic data including final Manufacturing and services PMIs, the Job Openings and Labour Turnover Survey (JOLTS) Job Openings, and non-farm payroll for November. 

According to S&P Global flash estimate, the manufacturing activities remained contracted for the fifth consecutive month, with the PMI reading of 48.8 in November, albeit a slight improvement from 48.5 in Octtober.

 In contrast, the flash services PMI surged to 57 in November from 55 in the previous month. The final readings of both data are expected to be aligned with these flash readings.

The US labour markets eased in recent months. In September, US JOLTS job openings fell to 7.44 million from 7.86 million in August. The reading is the slowest since January 2021, suggesting a cooling labour market.

The non-farm payroll increased by 12,000 in October, a sharp decline from 223, 000 in September, largely attributed to the Boeing strike, which caused a 46,000 position loss in the manufacturing sector. However, the unemployment rate steadied at 4.1%. 

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Market consensus predicts that JOLTS job openings may rise slightly to 7.49 million in October, while 205,000 new jobs are expected to have been created in November.

Asia-Pacific

In the Asia-Pacific region, Australia’s third-quarter Gross Domestic Product (GDP) will take centre stage. The country’s economy grew by 0.2% quarter by quarter in the second quarter, holding steady for the third consecutive quarter. 

On an annualised pace, GDP grew by 1%, making the lowest growth since the final quarter of 2020. Despite the slowdown, the Reserve Bank of Australia is expected to hold the interest rate steady at 4.35% until April 2025. 

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