Markets
US stock markets ended a low-volume, shortened after-Thanksgiving-trading session in the green with gains between 0.54-0.65% for the main indices. European equities overcame early weakness to finish 0.3% higher (EuroStoxx50). Last week’s moves, particularly in the US, called off the threat of equity markets turning into a sell-on-upticks pattern. US yields rose up to 2.8 bps with the belly of the curve underperforming the wings. The 10-yr tenor struggled around but eventually closed north of the 4% barrier. European rates traded listless. A mixed bag of national inflation numbers failed to inspire bond markets: the French and Italian November edition fell short of bar while Spain and Germany slightly topped it. It means tomorrow’s European figure (-0.3% m/m, 2.1% y/y) should come in close to expectations. Not that it matters for ECB policy. President Lagarde last Friday noted that interest rates at 2% are at the correct level. Her comments follow similar remarks coming from VP de Guindos earlier in the week. Lagarde struck a positive tone on the economy and won’t be surprised if growth, which already exceeded expectations, would “end up even higher by the end of the year”. A UK gilts (short-term, in our view) relief rally brought the likes of the 30-yr towards their end-October/November lows which, in turn, are the lowest levels since June of this year. UK Chancellor Reeves’ budget eased concerns for long-term bonds somewhat, mainly by installing a much bigger fiscal buffer and by a planned shift towards more short-dated debt, including a potential expansion to UK Treasury bills. But the “spend now, pay later” attitude will be coming back to haunt public finances. Sterling’s recovery seems to run into resistance around EUR/GBP 0.875 already with the pair this morning moving back north of the July high (0.8769). Cable (GBP/USD) trades above 1.32. Along with local stock markets, the euro gradually recovered against the USD on Friday. EUR/USD rebounded from intraday lows around 1.156 back to 1.16. The pair remains technically trapped though with little on the agenda today able to break the deadlock. The US manufacturing ISM is on tap. The services print is due Wednesday, along with the ADP job report. PCE deflators are up on Friday but the payrolls report remains missing as a consequence of the previous shutdown. The Japanese yen is performing strongly, pushing USD/JPY towards 155.6 and EUR/JPY to 180.45 following Ueda. The Bank of Japan governor in a speech seen as an advance notice for a rate hike said they’ll be considering all pro’s and cons for such a move in December, bombarding it to a live meeting. Ueda also warned about the risks of delaying a hike for too long. Short-term Japanese yields rise 4-5 bps with the 2-yr yield hitting 1% for the first time since 2008.
News & Views
Rating agency Moody’s confirmed the Hungarian credit rating at Baa2 with a negative outlook. Moody’s lowered its real GDP growth forecasts for this year and next from 1% and 2.8% to 0.5% and 2.3%. High dependence on the automotive sector and the German economy is negatively affecting exports, while the reduction in public investment spending against the backdrop of blocked EU funds is also weighing on growth. Because of wider deficits (5% of GDP in 2025 & 2026) and slower growth, Moody’s now projects a slight increase in the debt burden to around 74% of GDP in 2025 and 2026, from 73.5% in 2024. The negative outlook reflects downside risks related to the quality of Hungary’s institutions and governance, which could lead to a substantial loss of committed EU funds, weakening the economy’s growth prospects beyond what Moody’s currently expects. In turn, this could further weaken fiscal and debt metrics. In addition, given the still high reliance of Hungary on energy imports from Russia, a prolonged energy supply disruption would also be credit negative, although this risk has recently been mitigated by the one-year exemption on sanctions on Russian energy agreed with the US administration. The Hungarian forint is unmoved by the expected decision with EUR/HUF (382) holding near lowest levels since early 2024.
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) confirmed at the 40th OPEC and non-OPEC Ministerial Meeting to pause production increases in Q1 2026 as stability primes regaining market share for the moment in a market leaning towards a global surplus. They also approved a mechanism to assess participating countries’ maximum sustainable production capacity to be used as reference for the 2027 production baselines for all countries. The next official OPEC meeting is scheduled for June 7, 2026. A Joint Ministerial Monitoring Committee meeting to closely review global oil market conditions, oil production levels and the level of conformity of countries will continue to be held every two months. Brent crude prices rise this morning on the decision, trading currently around $63.5/b from a $62/b closing level last week.
