Sadly for VW, the worker walkouts may only get the matters worse when there is no money flowing in to make everyone happy. And finally, the French political scene remains messy with the far-right party Marine Le Pen threatening to team up with the leftist and take down Michel Barnier’s government by Wednesday if he doesn’t come up with a less strict budget plan. The problem is that no plan will be good enough to satisfy Le Pen and reduce France’s budget deficit.

As a result, the European futures are in the red at the time of writing, the French yields will probably retrace last Thursday, Friday’s decline, the spread between the German and French yield could shoot above 100bp and the euro is under pressure. The EURGBP starts the new week with a move below the 0.83 level and the EURUSD has potential to break below the 1.05 support on the back of an unsupportive political and economic setup.

One good news for France, though: S&P reaffirmed its AA- debt rating.

In Japan, the news are not brighter. Nissan’s CFO decided to step down as the company now expects its operating income for this fiscal year to be 70% lower than its previous forecast. Beyond Nissan, the Japanese manufacturing PMI fell to the lowest level since March, marking the 5th consecutive month of contraction on sustainably low new orders and weak domestic and international demand.

The news gives the USDJPY a good reason to rebound back above the 150 level this morning, retracing a part of last week gains triggered by rising bets that the Bank of Japan (BoJ) would hike the interest rates one more time before the year ends.

The downside pressure on euro and the yen is giving a boost to the US dollar early this week. The US dollar index is up and above the 106 this morning after retracing a part of its recent gains last week. Data-wise, last week printed a relatively strong 2.8% growth for Q3, with strong 3% growth in sales.

The data showed that the price pressures last quarter declined, but the core PCE index in October ticked higher from 2.7% to 2.8% - happily, that was already priced in. Consequently, the picture painted by the latest economic data doesn’t necessarily call for another 25bp in December, but this is what the markets are pricing in right now.

The US 2-year yield spent last week sliding, while activity on Fed funds futures gives around 68% probability for another 25bp in December. Note, however, that the latter expectation could change with a set of stronger-than-expected jobs and CPI data before the last FOMC decision of the year.

This week, the US will reveal the November jobs data and the expectations are mixed. The US economy is expected to have added 200K new nonfarm jobs last month, after the meagre 12K printed a month earlier due to hurricanes. The unemployment rate on the other hand is expected to have deteriorated to 4.2%, from 4.1% printed a month earlier, and the wages growth may have slightly eased from 0.4% to 0.3% on a monthly basis.

Given the hurricane disruption, the unemployment rate and the wages growth will give us a more reliable information on the medium term trend than the NFP number itself. Strong data will certainly revive the rate-cut-or-not discussions, while soft numbers will boost appetite for another 25bp cut from the Fed and could limit the dollar’s upside potential.

In equities, last week, and last month, ended on a positive note for the major US indices. The S&P500 and the Dow Jones hit a fresh record on Friday, Nasdaq also gained 0.90%. The small and mid-caps consolidated near ATH as well.

The European Stoxx 600 attempted a recovery on expectation that the European Central Bank (ECB) will cut thoroughly to give support to the struggling European economies, and to counter the US tariff threats, yet claiming fresh record highs with such a long list of unfavourable factors sounds unreasonable. Even less so as the ECB rate cut bets are pressured by the recent uptick in European inflation – and the USD’s recent strength is not promising.

Note however that some investors like the growing valuation gap between the American and the European stocks and bet that the things can only get better for the Europeans.

In energy, crude is supported by a better-than-expected Caixin manufacturing number, and hope that OPEC+ will announce - or maybe scrap - its plans to restore production next year to avoid adding to the global glut and pressuring prices lower.

The barrel of US crude finds buyers below $69pb, while Brent is bid below the $72pb. OPEC could give a positive spin to oil prices this week, therefore, the short-term risks remain tilted to the upside until the December 5th announcement, but OPEC alone will hardly reverse the medium-term bearish pressures if the demand side of the equation doesn’t improve.

Therefore, any price rallies in oil could be interesting top selling opportunities for medium-term bears.