German inflation data and France’s budget conundrum will take centre stage today as investors fret about the economic and political stability of the regional powerhouses, while the spectre of US tariffs looms large across Europe.
With the US markets closed for the Thanksgiving holiday, trading volumes were thin and market moves were muted in Asia. Futures indicate European stock markets are due to open a little higher.
The spotlight will be on French stocks after the country’s main stock index slid yesterday to its lowest level since early August, as budget wrangling threatened to upend the new government.
French bonds also dropped sharply, driving the premium that the government pays for long-term borrowing to its highest since the euro zone debt crisis of 2012.
Far-right leader Marine Le Pen has been threatening to topple France’s coalition government in a no-confidence vote over a disagreement with Prime Minister Michel Barnier over the proposed budget, which contains measures to cut spending and raise taxes.
Next door in Germany, where the collapse of the country’s fractious ruling coalition earlier this month paved the way for snap elections in February, the focus will be on preliminary inflation data for November.
Inflation is expected to remain elevated at 2.6% after a year-over-year rise in consumer prices of 2.4% in October, based on data harmonised for comparison with other EU countries.
A survey yesterday showed additional signs of trouble brewing for Europe’s largest economy.
German consumer sentiment looks set to tumble in the last month of the year as households, worried by reports of job cuts, grow pessimistic.
Germany’s government has forecast a 0.2% economic contraction in 2024, marking a second year of decline and cementing Germany’s place as a laggard among its large euro zone peers.
The political and economic turmoil in two of the region’s biggest economies may leave investors pondering who really is the sick man of Europe.
Key developments that could influence markets today include euro zone consumer confidence and sentiment surveys, as well as the German preliminary inflation report for November.