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

Dolan

Somewhat counter to post-election narratives and many new year

outlooks, long-dated U.S. Treasury yields continue to sink as

the November payrolls report holds all the attention on Friday.

The 30-year 'long bond' yield fell to 6-week

lows of 4.31%, flattening the 2-30 year U.S. yield curve gap to

just 16 basis points - its lowest since August.

With the 2-10 year curve flat as a pancake near zero, bond

market volatility gauges subsided to their lowest since

September.

Perhaps year-end effects are at play, with another steep

rise in cash-like money market fund holdings to a record $6.77

trillion in the latest week also catching eyes even as stock

indexes hold near record highs.

But with economic and trade uncertainty high before Donald

Trump's new administration takes office next month, and many

Federal Reserve officials hesitant about another interest rate

cut this year, the calming of the Treasury market is notable.

More immediately, markets need to negotiate November's jobs

report.

Forecasters reckon the report will show payrolls increased

by 200,000 jobs in November. But there remain nagging doubts

about the labor market after October's surprisingly small 12,000

gain - the weakest since 2020 - and the unemployment rate is

expected to tick up a tenth to 4.2%.

While October's low jobs reading was distorted by storms and

strikes, this week's U.S. economic updates have nodded to some

emerging softness - most obviously in the ISM survey of the

dominant service sector but also in creeping jobless claims,

ebbing hiring rates and sub-forecast private payrolls.

The U.S. economic surprise index compiled by Citi remains

firmly in positive territory but at its lowest since October.

Ahead of the jobs report, Fed futures remain uncertain about

another rate cut this month and price just a 65% chance of a

move. Fed Chair Jerome Powell on Wednesday appeared to signal a

slower pace of rate cuts ahead when he said the economy was

stronger at this point than the Fed had expected in September.

The dollar perked up a bit on Friday after the prior

day's slide.

FRENCH RALLY

Thursday's currency shift owed as much to a rallying euro

and French bonds and stocks as

political tensions in Paris appeared to ease.

French debt risk premiums versus benchmark German bunds fell

after French President Emmanuel Macron said he would appoint a

new prime minister in the coming days and his top priority would

be getting a 2025 budget adopted by parliament.

Despite Prime Minister Michel Barnier resigning on Thursday

after losing a confidence vote on the budget, Macron insisted he

would remain as president until his term ends in 2027.

Far-right National Rally leader Marine Le Pen, who voted to

oust Barnier, said on Thursday she had no plans to seek the

removal of Macron and a budget could be passed within weeks.

French 10-year yields fell to 2-month lows, with the

French-German spread compressing to two-week lows around 74bps.

The CAC40 stock benchmark was up more than 1%.

The European Central Bank meets next week amid widespread

expectations of another quarter-point rate cut - the fourth of

the year.

In Asia, tensions remained in South Korea. The ruling party

leader there said President Yoon Suk Yeol needed to be removed

from power for trying to impose martial law and the government

denied reports it was preparing to issue another such

declaration.

The won and the main KOSPI stock index both

fell again.

Chinese stocks outperformed, however, pushing

aside U.S. trade-related anxieties amid expectations for fresh

domestic policy support at next week's meeting of the Central

Economic Work Conference - which will set the agenda and targets

for China's economy for 2025.

China's ministry of finance also published draft rules that

would provide incentives for government agencies to buy

China-made products, fuelling bets on home-grown technologies.

Elsewhere, bitcoin recoiled below the $100,000 level

it breached for the first time this week. President-elect Donald

Trump said he was appointing former PayPal Chief

Operating Officer David Sacks as his "White House A.I. & Crypto

Czar", another step towards overhauling U.S. policy toward the

sector.

In company news, UnitedHealth's ( UNH ) stock dropped 5.2%

on Thursday after the shocking murder of its chief executive in

Manhattan on Wednesday and was the biggest weight on the Dow and

S&P 500.

The S&P 500 healthcare index fell 1.1% as health

insurance companies reassessed the risks for their top

executives.

In deals news, Direct Line rose 8.5% after the

British insurer said it was set to recommend a sweetened 3.61

billion pound ($4.60 billion) cash-and-stock takeover by Aviva

if the bigger rival makes a formal offer.

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

markets later on Friday:

* US November employment report, University of Michigan December

consumer sentiment survey, October consumer credit; Canada Nov

employment report

* Federal Reserve Board Governor Michelle Bowman, Chicago Fed

President Austan Goolsbee, Cleveland Fed President Beth Hammack

and San Francisco Fed chief Mary Daly all speak

(Editing by Christina Fincher

[email protected])