French Bonds Hit 2012 High Amid Budget Tensions

French government bonds faced sharp declines, with long-term borrowing premiums hitting their highest levels since 2012 as budget disagreements sparked threats of a no-confidence vote against Prime Minister Michel Barnier’s government. In Germany, inflation for November is expected to rise to 2.6%, following a 2.4% increase in October, while consumer sentiment remains weak amid concerns over job cuts. European stock markets are set to open higher after France’s main index hit a three-month low on Wednesday.

Equities

The FTSE 100 rose 0.2% on Wednesday, recovering slightly after the previous day’s sell-off prompted by President-elect Donald Trump’s threats of tariffs on key trading partners. Real estate stocks gained 1.5%, bolstered by falling UK government bond yields, while housebuilders climbed 0.9%. Sterling strengthened 0.9% against the dollar, following weak US capital goods orders that increased expectations of a Federal Reserve rate cut in December.

Among UK-listed companies, Anglo American added 0.5% after raising £420 million by selling shares in its Anglo American Platinum unit. Aston Martin Lagonda dropped 5.5% after warning that annual profits could decline by up to 11% due to delivery delays, prompting the luxury carmaker to announce plans to raise additional capital. Pets at Home slumped 17% after issuing a modest full-year profit forecast, attributing weak demand to cautious spending by pet owners.

In the US, Wall Street’s major indices closed lower. The Nasdaq Composite led losses, falling 0.6% as technology stocks weighed on performance. The S&P 500 slipped 0.38%, and the Dow Jones Industrial Average declined 0.31%. Inflation data showing stubbornly high prices dampened optimism for aggressive rate cuts by the Federal Reserve.

Dell Technologies shares dropped 12%, and HP fell nearly 6% after issuing downbeat quarterly forecasts, dragging down the Information Technology sector by 1.2%. Workday fell 6.2% after its revenue guidance fell short of expectations, citing slower client spending on its human capital management software. Nvidia and Microsoft also declined, while the Philadelphia Semiconductor Index shed 1.8%.

Despite a strong third-quarter GDP growth rate of 2.8% and a decline in weekly jobless claims to 213,000, investors remained cautious. Minutes from the Federal Reserve’s November meeting revealed uncertainty about future rate cuts. Trading volumes were lower than average ahead of the Thanksgiving holiday, reflecting subdued activity across US markets.

Forex & Commodities

The US dollar weakened broadly on Wednesday in thin pre-holiday trading. The dollar index dropped 0.74% to 106.06, its lowest since 13 November, and is down 1.9% from a two-year high reached on Friday. The yen strengthened 1.43% to 150.91 against the dollar, reaching its highest in five weeks as traders adjusted positions ahead of a long weekend. The euro gained 0.74% to $1.0564, its strongest level in a week, while sterling rose 0.81% to $1.267. The Canadian dollar edged up 0.18% to C$1.4027, with the greenback retreating from a recent 4.5-year high.

Oil prices declined as US gasoline stocks unexpectedly rose. Brent crude slipped 0.27% to $72.63 per barrel, while WTI dropped 0.29% to $68.52. Markets await the weekend’s OPEC+ meeting, with expectations that planned production hikes could be delayed. Concerns about slowing demand in the US and China and a ceasefire between Israel and Hezbollah have weighed on prices.

Gold remained steady at $2,637.78 per ounce as traders digested economic data and inflation signals. The Fed’s preferred inflation gauge, the PCE price index, rose 2.3% year-on-year in October, supporting expectations of a December rate cut. However, speculation about potential tariffs under President-elect Trump tempered expectations of aggressive monetary easing next year. Spot silver fell 0.8% to $29.84, while platinum edged up 0.1% to $928.10, and palladium rose 0.6% to $978.05.