A look at the day ahead in U.S. and global markets from Mike

Dolan

While Americans have been feasting and preparing to shop, U.S.

Treasuries have put in a decent rally this week - countering

considerable post-election fiscal anxieties as world bonds find

a bid more broadly.

While the holiday week and month-end position squaring may

explain some of the peculiar subsidence in government yields,

the move partly reverses at least one of the prevailing 'Trump

trades' and has dragged the lofty dollar down with it.

Well-behaved U.S. inflation updates and decent demand during

another heavy week of debt sales have helped a rally that began

in earnest last Friday as President-elect Donald Trump nominated

Wall Street money manager Scott Bessent as treasury Secretary.

In the backdrop, Trump's early trade tariff threats may also

have darkened the global growth outlook, while nerves in Europe

about France's tense budget negotiations appear to have eased

somewhat overnight.

Testing the durability of the drop in borrowing rates may

need the new month to get underway next week, with U.S. stock

and bond markets open only for half a day on Friday after

Thanksgiving.

But the moves have been sizeable - with 10-year yields

retreating to their lowest in a month to 4.20% and

30-year long bond yields at their lowest in six

weeks.

Long-term inflation expectations derived from 10-year

inflation protected Treasury securities have

slipped below 2.3% this week too, with inflation swaps

also dialing back.

The New York Fed's estimate of the 10-year 'term premium' -

the additional compensation investors demand for holding

longer-term debt to maturity - has dissipated too. It's now just

13 basis points and almost a third of post-election peaks.

Energy markets have helped, with crude prices ebbing

on the tentative ceasefire between Israel and Hezbollah in

Lebanon. U.S. gasoline pump prices quietly ticked down to their

lowest in more than three years.

But there's also a sense that the growth picture worldwide

may also be darkening and the 2-to-10 year Treasury yield curve

barely clung to positive territory on Friday having

dipped back negative for the first time since Oct. 10 earlier

this week.

With a big week for labor market data due next week, one eye

remains on the gradually cooling U.S. employment situation, and

futures still price more than a 50% chance the Federal Reserve

will cut another quarter point off policy rates next month.

FEASTING AND SHOPPING

Wall Street stock benchmarks were higher ahead of

Friday's shortened session, with eyes on the retailers and price

discounting amid the traditional 'Black Friday' spending spree.

There were differing inflation pictures overseas, with

Japan's yen capitalizing on the softer dollar by rising

more than 1% on above-forecast Tokyo inflation readings.

The equivalent November reading for the euro zone moved back

above the European Central Bank's 2% target, but was in line

with expectations.

French and German government debt yields both fell back on

Friday, with the spread between the two narrowing

as signs of some compromise emerged in the French budget row.

French Prime Minister Michel Barnier on Thursday dropped

plans to raise electricity taxes in his 2025 budget, bowing to

far-right threats to bring the government down unless he eased

the burden on the working classes.

However, the far-right National Rally warned this concession

was insufficient to avoid a no-confidence vote as early as next

week.

Chinese stocks outperformed earlier amid hopes for

some positive news from key business surveys released this

weekend.

Key developments that should provide more direction to U.S.

markets later on Friday:

* Chicago November business survey, Canada Q3 GDP revision

* European Central Bank vice president Luis de Guindos speaks

* Bank of England publishes financial stability report

(By Mike Dolan,

[email protected])