Aurelia Butler

(Reuters) – The risk premium investors demand to hold French debt rather than German Bunds dropped on Thursday after the widely expected collapse of the French government. Far-right and left-wing lawmakers joined forces early this week to back a no-confidence motion against Prime Minister Michel Barnier. Analysts fear France would enter a slow-burning crisis that could lead to a deterioration of sovereign creditworthiness and less economic growth.They await the next move from President Emmanuel Macron, even if most analysts remained sceptical about a significant change of the current situation. Sources recently said he aimed to install a new prime minister swiftly.”We hold onto our conclusion that any French government from now until the earliest date at which a legislative election is plausible (September 2025, in our view) will operate in a context of political instability, very limited policy space, and persistent uncertainty about the medium-term policy outlook,” Citi said in a research note.In the draft budget bills, the outgoing government targeted 60 billion euros in spending cuts and tax increases to narrow the deficit to 5.1% of gross domestic product GDP in 2025 from 7.0% in a no-policy change scenario.”Ultimately, the very likely extension of the 2024 budget to 2025 implies a fiscal policy that is less restrictive than planned in terms of tax revenues and in line with what was planned in terms of public spending,” said Charlotte de Montpellier, senior economist, France and Switzerland at ING.The gap between French and German yields – a gauge of the premium investors demand to hold France’s debt – tightened 3 basis points (bps) to 80.60 bps. It hit 90 bps on Monday, its widest since 2012.Given the price action in previous days, market participants had been expecting a muted reaction or even a ‘buy on rumours, sell on news’ response to the fall of the government.”We expect its interest payments (on French public debt) to revenue ratio will reach 4.6% in 2025 and 5.2% in 2026, up from 4.4% in 2024,” said Moody’s (NYSE:MCO).”A durable increase in financing costs would further weaken debt affordability despite the country’s relatively long average maturity of 8.5 years,” the rating agency added.France raised 4.6 billion euros ($4.84 billion) from a sale of longer-dated bonds on Thursday, less than the maximum amount it was targeting. Meanwhile, Germany’s borrowing costs edged up, with investors waiting for jobs data from the U.S. later today and Friday, which could affect expectations for the Federal Reserve monetary easing path.U.S. Fed Chair Jerome Powell appeared to signal his support for a slower pace of interest-rate cuts ahead. Germany’s 10-year government bond yields – the euro area’s benchmark – rose one bp to 2.06%. It hit 2.033% last week, its lowest since early October.”Valuations (with Bund yields at 2%) start to look stretched ahead of next week’s likely 25 bps European Central Bank rate cut,” said Hauke Siemssen, rate strategist at Commerzbank (ETR:CBKG).Italian bonds slightly outperformed their German peers, with the gap between Italian and German yields hitting a fresh 35-month low at 110.40 bps.Most of the yield spreads versus German Bunds have tightened as markets expect the ECB’s significant rate cuts in 2025, which would ease the burden of debt for over-leveraged economies. More

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Following the collapse of the French government, the risk premium on French debt decreased from its highest point in over a decade. This shift occurred on Thursday when the premium investors require to hold French bonds rather than German Bunds lessened by 3 basis points to 80.90 bps. Earlier in the week, the premium had expanded to 90 bps, the widest margin since 2012.The government’s downfall was precipitated by a coalition of far-right and left-wing legislators who supported a no-confidence motion against Prime Minister Michel Barnier earlier this week. Market observers had anticipated a subdued market response to the government’s collapse, or even a ‘buy on rumors, sell on news’ behavior.Analysts have suggested that France may be entering a period of prolonged crisis, potentially leading to a gradual decline in sovereign creditworthiness and weaker economic growth. They referenced the government’s draft budget proposals, which included 60 billion euros in spending reductions and tax hikes aimed at reducing the deficit to 5.1% of GDP by 2025.Euro zone borrowing costs have seen a slight increase as investors await employment data from the United States, which could influence expectations for the Federal Reserve’s future monetary policy. Federal Reserve Chair Jerome Powell indicated on Wednesday that the U.S. economy’s resilience surpassed the central bank’s forecasts from September, suggesting a potential slowdown in the pace of interest rate reductions.Meanwhile, Germany’s benchmark 10-year government bond yield rose by 2.5 basis points to 2.08%, after reaching a low of 2.033% the previous week, marking the lowest point since early October. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

Neuralink, the brain technology firm led by Elon Musk, has been cited by the Food and Drug Administration (FDA) for “objectionable conditions or practices” at its animal testing laboratory in California, Reuters reported. This notice follows the company’s approval for a human brain implant study. The FDA’s discovery of the issues occurred in June 2023, shortly after Neuralink was permitted to conduct a limited study on its brain implant technology in humans. The concerns regarding the animal testing facility were addressed in a letter to Congress on November 29, responding to issues raised by Representative Earl Blumenauer, an advocate for animal welfare from Oregon.The FDA has urged Neuralink to implement voluntary corrective actions to remedy the conditions found. The agency has indicated that the issues, while warranting citations, were not significant enough to necessitate regulatory action. The FDA emphasized that the inspection did not reveal any violations that would compromise the safety of Neuralink’s devices.In a statement, the FDA clarified that the citations were related to the documentation of animal research but did not specify the nature of the concerns. The agency’s inspection report from June 2023 had previously noted quality control and record-keeping issues at the facility, although it was unclear at the time what level of action would be required.Neuralink has not publicly commented on whether it has addressed the FDA’s findings. The company has previously stated that its animal testing protocols exceed the requirements of current regulations. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

BERLIN (Reuters) – For Eva Henschke, Germany’s Christmas markets are a chance to temporarily forget about the colder, darker days with a hot mug of mulled wine or eggnog and a bratwurst off the grill. But more so than in years past, she has had to keep a careful eye on costs when deciding what festive bite to indulge in. “When I come here, I buy something. But you have to pay attention to the prices,” Henschke said at the market next to the preserved World War Two ruins of Berlin’s Memorial Church where it was established in 1948.As costs for festive treats at traditional Christmas markets hit record highs in Germany, traders are unwrapping new strategies, such as all-inclusive tickets and special themes, to keep attracting locals and tourists alike.”A crisis makes you creative,” said Fabian Lau, managing director of FARO Group. “We founded Germany’s only all-inclusive Christmas market.”For those who want unlimited mulled wine and as many German specialities as possible without worrying about costs, the Christmas Market at the Spree offers all-inclusive tickets starting from 29.90 euros ($31.48) – for those willing to go after 8 p.m. and during the week. A ticket at peak time, during the weekend, will set any wannabe merrymakers back 45.90 euros. Lau said demand for the tickets is “extremely high,” with over 1,000 sold daily and 90% of them already snapped up for this Christmas season. “I think it has changed the way people go to the Christmas market,” said CJ, an international student in Berlin visiting the market. “With the all-inclusive ticket, I think people just come here with an empty stomach.” Other creative ways organisers have come up with to draw customers include a market catering to dogs, with a dog show and treats for four-legged visitors, as well as unique locations such as an abandoned spy tower and a former airport hall.”With more than 60 Christmas markets, Berlin is also the capital of Christmas markets,” said Christian Taenzler, spokesperson at Visit Berlin. “While the winter season used to be more of an off-season for Berlin, this has changed significantly since the 2000s.”In old and new markets, Germany’s favourite Christmas beverage, Gluehwein (mulled wine), now sells for a record 5 euros per mug in Berlin, a 50% rise from the pre-pandemic 3.25 euros.The elevated costs arise from high energy prices and staff shortages among other factors, said Luba Levkina, spokesperson for activa, which organises mobile Christmas markets.Sedat Sarikurt, a mulled wine vendor at the Memorial Church, hiked his prices by 50 cents compared with last year, despite initial concerns about selling fewer drinks due to higher costs.”But we observe that both tourists and locals still buy mulled wine,” Sarikurt said. “It is (just) once a year that we have Christmas.”($1 = 0.9500 euros) More

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