Another - and 6th - hyper-positive week for the bond markets, with treasuries continuing their rally following Jerome Powell's comments at the end of the afternoon.

The U.S. 10-yr yield eased by -8pts to 4.25% (or -22pts over the week), dragging European sovereign debt in its wake, which erased up to -10pts on Friday: the Bund eased by -10% to 2.35%, or -29pts over the past week.... which remains 'in line' with the fall in inflation and the forecast of a recession on the other side of the Rhine in the 2nd half of 2023 and at least during the 1st half of 2024.

Our OATs are also down -10.5Pts to 2.925% (i.e. -28Pts weekly and -64Pts since October 26, the start of the historic stock market rally), while France is beating a debt and deficit record (-177.7bn at the end of October) and could see its debt downgraded by S&P (obviously, nobody believes in this).
Italian BTPs are doing even better, with -13pts to 4.10% on December 1 and -30pts weekly, and above all -75pts since October 26, as if the ECB were going to reduce the cost of money threefold in the next 9 or 12 months.
This is in stark contrast once again to UK Gilts, which have eased by just -3pts to 4.184%.... and whose yields are settling above those of BTPs or Greek 10-year bonds.

In the USA, Goldman Sachs estimates the probability of the FED cutting rates as early as March 2024 at over 50%, to which Jerome Powell replied on Friday that it was "premature to talk about a rate cut (we'll have to line up favorable figures for several months) and confirms that a hike remains on the table.... but he is clearly not being believed, and his comments are pure rhetoric.

Note that Goldman Sachs sees oil moving between $80 and $100 in 2024, which means that the fall in energy prices will no longer be the driving force behind a fall in inflation.

As for the figures, the contraction in US manufacturing slowed in November, according to the monthly ISM (Institute for Supply Management) survey published this Friday.

The index was perfectly unchanged last month at 46.7, the same level as in October, whereas economists were expecting it to rise to 47.8.
The new orders sub-index rose to 48.3 from 45.5 the previous month, still in the contraction zone (below the 50-point threshold), while the employment sub-index fell to 45.8 from 46.8 in October.
Earlier, the manufacturing PMI published by S&P Global came in at 49.4 for the month, in line with its flash estimate and after 50 for October.

In the same vein of precursors to industrial activity, investors this morning took note of the HCOB PMI index for manufacturing industry in the eurozone, produced by S&P Global
. This recovered from 43.1 in October to 44.2 in November, its highest level since last May, but still pointing to a sharp contraction in the sector.

The data once again point to declines in activity, new orders, purchasing volumes and inventories, but the outlook for business has improved. At the same time, purchasing prices have again fallen sharply.


Copyright (c) 2023 CercleFinance.com. All rights reserved.