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

Dolan

U.S. Treasury yields slipped back on Monday after Wall Street

money manager Scott Bessent got the nod to be the next Treasury

Secretary, with markets hoping his take on tax cuts and tariffs

may at least be sensitive to edgy investor concerns.

Ahead of the Thanksgiving holiday week, President-elect

Donald Trump ended intense speculation over the Treasury pick

late on Friday and put Bessent forward for the job.

While in favor of extending 2017's tax cuts, more tax reform

and deregulation, Bessent has been vocal about fiscal control,

sees tariff threats mostly as a negotiating tool and supports

the dollar's dominant reserve currency status.

In an interview with the Wall Street Journal published on

Sunday, Bessent said measures would include making Trump's first

term tax cuts permanent, as well as eliminating taxes on tips,

social-security benefits and overtime pay.

Perhaps the biggest relief in debt markets was that his

experience as a Wall Street trader would influence his

calibration of all those policies if markets got restive.

Although he has backed away from the idea since, Bessent did

recently advocate undermining the authority of Federal Reserve

chair Jerome Powell by nominating Powell's successor early and

effectively creating a "shadow" Fed boss.

The upshot on Monday, however, was that 10-year and 30-year

Treasury yields fell almost 10 basis

points from Friday's close to as low as 4.32% and 4.51%

respectively before steadying.

The drop in yields, along with hopes for a more tempered

approach to tariff hikes from the administration at large, saw

the dollar retreat, and stock index futures extended

Friday's rally ahead of the Monday's bell.

The dollar index fell back from Friday's two-year

highs, with the euro recovering ground from its sharp

plunge late last week.

With speculation that China would remain the focus for any

U.S. tariff hike campaign - and proposed universal tariff rises

more nuanced - European and Japanese stocks

advanced while Chinese mainland and Hong Kong

benchmarks fell again on Monday.

Whatever happens under Trump, pressure on China is intense

already. The outgoing Joe Biden administration is set to unveil

new export restrictions on China this week, the U.S. Chamber of

Commerce told members.

New regulations could add up to 200 Chinese chip companies

to a trade restriction list that bars most U.S. suppliers from

shipping goods to the targeted firms, an email from the powerful

Washington-based lobbying group said.

In Europe, rising economic, trade and geopolitical worries

were underscored by the Ifo institute's latest German business

survey - which showed morale fell more than expected in

November.

Last week's divergence in euro zone business surveys showing

fresh contraction and another robust U.S. reading were stark.

Pressure on the European Central Bank to keep easing

monetary policy is building and has kept alive hopes of a rate

cut of up to 50bps at next month's final policy meeting of the

year.

Although ECB chief economist Philip Lane said there was

still a way to go to ensure inflation is sustainably back at

target, he warned of the dangers of overly tight interest rates.

"Monetary policy should not remain restrictive for too

long," French newspaper Les Echos quoted Lane as saying on

Monday. "Otherwise, the economy will not grow sufficiently and

inflation will, I believe, fall below the target."

The pressure on European central banks more broadly was

spotlighted on Friday when Swiss National Bank boss Martin

Schlegel opened up the possibility of a return to negative

interest rates if necessary.

"Nobody loves negative interest rates, the SNB does not love

negative interest rates, but if it is necessary we are ready to

take the next step," he said.

Back stateside, the strong readings from flash November

business surveys and creeping long-term inflation expectations

in the University of Michigan's latest household survey saw Fed

rate cut bets slip back further. Only two quarter point cuts are

now fully priced in futures markets over the coming year.

Wednesday's release of the October Personal Consumption

Expenditures inflation reading - the Fed's favored gauge - tops

the week's data releases ahead of Thursday's holiday.

In deals news, Italy's UniCredit dropped 2% on

Monday after launching a surprise all-share offer worth 10

billion euros ($10.45 billion) for smaller domestic rival Banco

BPM which was up 5%.

Commerzbank fell 6% as investors assessed the

offer's impact on Unicredit's likely buyout of the German

lender.

Shares in British broadcaster ITV jumped 9% on media

reports that it could be a takeover target for a team led by CVC

Capital Partners.

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

markets later on Monday:

* Dallas Federal Reserve November business survey, Chicago

Federal Reserve October national business survey

* European Central Bank Chief Economist Philip Lane and

Ireland's central bank chief Gabriel Makhlouf speak

* US corporate earnings: Agilent Technologies ( A )

* US Treasury sells $69 billion of 2-year notes

* G7 foreign ministers meet in Fiuggi, Italy

(By Mike Dolan, Editing by Ed Osmond

[email protected])