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Euro stumbles amid French political crisis and weak data
The euro weakened against the dollar amid political unrest in France and disappointing manufacturing data across the Eurozone, while China’s 10-year bond yield hit record lows on expectations of further economic stimulus
Euro fell 0.6% to $1.05 amid French political uncertainty
France’s far-right party threatens a no-confidence vote
China’s 10-year bond yield neared 2%, a multi-decade low
Euro weakens again
The euro slid 0.6% to $1.05 as deepening political instability in France rattled markets and raised concerns about the Eurozone's economic resilience. Far-right leader Jordan Bardella of National Rally warned of supporting a no-confidence vote that could bring down Prime Minister Michel Barnier's fragile government, escalating tensions over the national budget.
Investor sentiment further soured following dovish remarks by European Central Bank (ECB) policymaker Martins Kazaks, which fueled expectations of future interest rate cuts. The uncertainty weighed on France’s CAC 40, which fell 1% to 7,163 on Monday.
Adding to the Eurozone's woes, November’s manufacturing data highlighted a sharp contraction across the bloc. The Manufacturing PMI fell to 45.2, down from 46.0 in October, signaling broad-based weakness in industrial activity. Germany and France recorded 10-month lows at 43.0 and 43.1, respectively, while Italy hit a 12-month low at 44.5. The Netherlands followed with an 11-month low of 46.6. Spain and Greece remained above the 50-mark, signaling expansion, but slipped to two-month lows of 53.1 and 50.9, respectively.
China’s Bond yields hit historic lows as stimulus hopes grow
China’s 10-year government bond yield tumbled to nearly 2%, marking a multi-decade low as markets anticipate further monetary easing from Beijing. The People’s Bank of China (PBOC) has ramped up liquidity measures, injecting 800 billion yuan into the banking system in November, up from 500 billion yuan the previous month. Additionally, the central bank purchased a net 200 billion yuan in government bonds, reinforcing counter-cyclical policies.
PBOC Governor Pan Gongsheng has signaled potential cuts to the reserve requirement ratio (RRR) and reverse repo rates by year-end, with reductions of 25-50 basis points and 20 basis points, respectively, under consideration. Investors are now eyeing the December Politburo meeting and the annual Central Economic Work Conference for additional stimulus announcements, critical to supporting China’s slowing economy.
