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

Dolan

The dollar breezed into December on the front foot, helped by

Donald Trump's weekend support for its global reserve status

just as the euro wavered on tense French politics and China's

yuan swooned on fresh easing expectations there.

As U.S. markets return in earnest from Thanksgiving into the

final month of a bumper year, the dollar recaptured its mojo

after a tepid holiday week for the greenback.

Without any obvious prompt, the President-elect's latest

social media swipe warned the BRICS bloc of developing nations

against pushing a rival currency to the dollar in global trade

and commerce - adding they faced 100% tariffs if they did.

While the trade threat seems notional, it contained some

heft in markets who had assumed a second Trump presidency would

be overtly behind weakening the dollar's value. Reserve status

and exchange rate value are two different things, of course, but

the comments seemed to bolster the currency nonetheless.

More immediately the 0.5% jump in the dollar index on

Monday was driven largely by the relapse in the euro as markets

assessed the risk of a collapse of the French government.

France's far-right National Rally will likely back a

no-confidence motion against the government unless there's a

"last-minute miracle", with lawmaker Marine Le Pen giving Prime

Minister Michel Barnier until Monday to yield to RN's demands as

a part of protracted horse trading over the annual budget plan.

The euro fell almost a cent at one point first thing

on Monday before regaining a toehold above $1.05 and France's

benchmark CAC 40 dropped more than 1%.

And yet French sovereign debt, in the eye of the storm,

appeared calmer - with nominal 10-year yields

falling to their lowest in a month and premiums over German

equivalents edging in from Friday's levels.

Part of the subsidence of borrowing costs is related to

heightened expectations of European Central Bank easing as the

euro wide economy struggles and German manufacturing activity

shrinks amid auto sector woes, trade worries and election angst.

German bund yields fell to their lowest since

early October, eyeing lows of 2% for the first time since

January.

But the other balm for French bonds was relief that Standard

& Poor's on Friday held its rating on France's long-term

sovereign debt steady at "AA-" and kept its outlook at stable.

And it wasn't just euro government yields on the retreat.

Despite more upbeat November business surveys from China

this weekend, which helped benchmark stocks indexes

there outperform on Monday, intense speculation about further

easing from the People's Bank of China saw 10-year yields

dip below 2% for the first time on record - more

than 220 basis points below U.S. equivalents.

The move, as the PBOC tries to bring deposit rates offered

by banks to brokerages and fund companies in line with its

official 1.5% reverse repo policy rate, saw the offshore yuan

fall to its weakest level since July.

Speculation is rife that China will respond to any renewed

tariff hikes from an incoming Trump administration by allowing a

weaker yuan, partly offsetting the impact on its exports to the

United States.

But before we even get there, further restrictions on

U.S.-China trade were due on Monday, with the U.S. due to launch

its third crackdown in three years on China's semiconductor

industry - curbing exports to 140 companies including chip

equipment maker Naura Technology Group among other

moves.

Back on Wall Street, the new week brings another critical

sweep of labor market updates - now central to Federal Reserve

thinking as it heads towards its final meeting of the year and

after unusual payroll weakness in October.

After several jobs market cuts through the week, Friday

brings the November employment report. Payrolls growth is

expected to have bounced back to 183,000 during the month

compared to the meager 12,000 recorded for October.

Still, much like sovereign bonds elsewhere, U.S. Treasury

yields - which tumbled sharply through the past week

to confound many post-election bets - remain subdued first thing

on Monday. Key U.S. manufacturing readouts for last month are

due from ISM and S&P Global later.

U.S. stock futures, which ended the shortened week on

a high last Friday, ticked back slightly ahead of the bell.

In corporate news, and partly reflecting the auto sector

shudder in Europe as trade war fears mount, shares in Stellantis

slumped almost 9% to two-year lows after CEO Carlos Tavares

resigned abruptly on Sunday and deepened investors' worries

about the turnaround of the world's No. 4 carmaker.

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

markets later on Monday:

* US November manufacturing surveys from ISM and S&P Global,

October construction spending

* Federal Reserve Board Governor Christopher Waller and New York

Fed President John Williams speak

* US corporate earnings: Zscaler

* German Foreign Minister Annalena Baerbock visits China

(By Mike Dolan,

[email protected])