Weekly house view | Hawkish cut
The week in review
Conflicting data about the health of the US labour market held stocks in a holding pattern last week ahead of this week’s Federal Reserve meeting, at which we expect a hawkish cut in interest rates. The ADP report indicated negative hiring especially in small businesses and specific industries, while jobless claims hit a new low during Thanksgiving. A record 202.9 million US customers shopped during the during Thanksgiving holiday weekend. The S&P 5001 rose 0.4% (in USD) for the week as investors awaited the Fed meeting, at which hawkish forward guidance is expected. In Europe, Germany’s ruling coalition secured parliamentary backing for its pension bill, avoiding a setback that could have triggered the collapse of the government after only seven months in power. In France, parliament approved the revenue section of the 2026 social security budget, an important step towards the full budget vote. In Brazil, stock and currency markets fell on the news that jailed ex-president Jair Bolsonaro had backed his son to run in the 2026 presidential race against incumbent Luiz Inácio Lula da Silva. We still believe that Tarcisio de Freitas is still the most likely candidate to face Lula and win.
Geopolitics
Japan said Chinese military aircraft locked radar on its fighter jets, escalating a diplomatic dispute that began last month when Japan’s prime minister suggested Tokyo could take military action if Beijing attacked Taiwan. White House envoy Steve Witkoff and advisor Jared Kushner met Kyiv officials after a US meeting with Russian President Vladimir Putin concluded with no agreement on ending the war in Ukraine.
Key data
The US ISM manufacturing index fell to 48.2 in November as new orders and employment both dropped. The ISM services index came in at a stronger-than-expected 52.6, with new orders at 52.9. The University of Michigan's consumer sentiment index rose in December for the first time in five months. Canada’s labour market added a net 53,600 jobs in November and the unemployment rate fell to 6.5%. Euro area November headline inflation rose to 2.2% year-on-year, with core inflation steady at 2.4%. Swiss November CPI fell to 0.0% years-on-year, the lowest since May 2025, with core inflation at 0.4%.
