Some say that the fact that the French political turmoil increases the chances of more European Central Bank (ECB) support is helping the French and the broader European indices to do well. But the gains in euro go against that rhetoric... Others say that Le Pen’s comforting words that France could overcome this crisis and even deliver a ‘budget’ in a few weeks – with a slower deficit reducing path of course – have been soothing for the market’s nerves and triggered a relief rally. That’s a bit of day-dreaming, however, given that the job of getting a budget plan improved will probably be as hard for the next government than it has been for Barnier’s - and the next PM should send the new 2025 budget proposal to the president by Dec 21. Tight, tight. And oh, Le Pen also said that Macron doesn’t need to resign – and it made the headlines in a good way, but it sounded like ‘he doesn’t need to resign if he wants to sit in a divided government, handcuffed and wait until his term ends’. But anyway, whatever it is, even chaos is France looks elegant – at least from the market perspective. The market is in a much better mood this Friday than it was the same time last week – when the French government was just about to collapse. And to end this week with a sugar coating, the Eurozone is expected to print a better-looking growth number in Q3. The yearly figure could be revised from 0.6% to 0.9%. The latter could help the euro finish up the week on a better note. The EURUSD is preparing to test the 1.06 resistance. The pair could find enough energy from the euro leg to break the back of the 1.06 offers, but the US jobs figures and the dollar’s direction will say the last word.

The US dollar index came swiftly down yesterday on the back of a higher-than-expected jobless claims number last week. Released earlier this week, the US data showed higher job openings in October, but lower-than-expected private job additions in November. In summary, the jobs data was mixed and didn’t lead to an important sentiment change regarding the Federal Reserve (Fed) expectations. The Fed is expected to cut by another 25bp when it meets this month with a 72% probability attached to this scenario. Today, the official jobs data is expected to print a strong NFP number – of around 200K new nonfarm job additions for November. But investors are ready to disregard any strength on that front given that last month’s figure will be impacted by the hurricanes and strikes of the month before. We will keep a closer eye on the unemployment rate – which may have slightly deteriorated from 4.1% to 4.2%, and the wages growth – which may have slightly eased from 0.4% to 0.3% on a monthly basis. The market, and dollar traders, are in a mood to send the US dollar lower. As such, US jobs data in line with expectations – or ideally softer than expected – should lead to a further dollar depreciation into the weekly closing bell. But if the data shows any surprise strength, Powell’s mostly ignored remarks about a ‘remarkably strong US economy and decreased risks in jobs market’ will come back to the headlines and could spoil the mood among Fed doves.

Third time’s not the charm
As widely expected, OPEC announced another 3-month delay to its production restoration plans. It is now planned from April – a full year later than the initial plan. The cartel also said that the restoration will be slower than previously imagined. The problem is, oil bulls are not impressed, because OPEC’s decision to delay its production restoration plans won’t avert a global surplus that the IEA expects to stay above 1mbpd throughout next year. OPEC's announcement, fully priced in, left the bears in control as US crude hovered around $69 per barrel. With the decision lacking surprises, bears are eyeing a drop to the $65-$67 range.

Up and up
The S&P500 and Nasdaq 100 consolidated gains near ATH levels, while the S&P500 equal weight index underperformed its normal-weight version this week, on the back of a rebound in technology stocks. The narrative is still in favour of a broadening market rally toward the non-tech pockets of the market thanks to resilient growth and softer financial conditions. Therefore, short-term divergences are interesting buying opportunities for the equal-weighted index.

The buy-the-divergence rhetoric is also giving support to the European equities. The Stoxx 600 performs surprisingly well for a continent that goes through important political and economical struggles. The rally in DAX index defies the walkout in VW factories, the dire economic fundamentals and an upcoming snap election. So, it’s all about the falling yields and the ECB expectations. Full stop.

What will the ECB do next week? The consensus is another 25bp cut. But many expect the ECB to shift its focus from inflation – that it considers on path to target – to economic growth.

The conclusion of the week is: the stocks go up when the economy is strong, and they go even higher when the economy is weak.