Economy

Citigroup’s revision came after data on Friday showed nonfarm payrolls rose by 227,000 jobs last month, following an upward revision to 36,000 jobs in October. Economists surveyed by Reuters had predicted a gain of 200,000 jobs, compared with the initially reported increase of 12,000 in October.U.S. job growth surged in November after being severely hindered by hurricanes and strikes, but a rise in the unemployment rate to 4.2% pointed to an easing labor market that indicated the Fed could likely cut interest rates this month.Major brokerages including Morgan Stanley (NYSE:MS) and Goldman Sachs have reiterated their expectation of a 25-basis-point interest rate cut by the Fed in December after the jobs data.”The report was not quite soft enough for the Fed to cut 50bp as we had projected for December, but a 25bp cut in December appears very likely,” Citigroup analysts said in a note dated Dec. 6.”We expect the Fed to continue to cut in 25bp increments at each upcoming meeting to a terminal policy rate of 3.00-3.25%,” they added.In a separate note dated Dec. 6, Citigroup introduced its 2025 year-end target for the S&P 500 index at 6500 and maintained its “positive” view on U.S. equities going into 2025. More

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Households expecting their financial situation to be better a year from now jumped to 37.6%, the highest since before the Covid pandemic, a New York Fed survey shows.
The median expectation for growth in government debt was at 6.2%, down 2.3 percentage points from October and the lowest level since February 2020.

U.S. President-elect Donald Trump holds an award during the FOX Nation’s Patriot Awards at the Tilles Center on December 05, 2024 in Greenvale, New York.
Michael M. Santiago | Getty Images

Optimism about household finances hit a multiyear high following Donald Trump’s presidential election victory in November, according to a New York Federal Reserve survey released Monday.
Households expecting their financial situation to be better a year from now jumped to 37.6%, an increase of about 8 percentage points from October, the central bank’s survey of approximately 1,300 heads of households showed. That was the highest reading since February 2020, just before the Covid-19 pandemic hit.

In conjunction with the rise of optimism, the level of those who expect their financial situation to get worse moved down to 20.7%, off nearly 2 percentage points from a month ago and the lowest since May 2021.
The results follow Trump’s Nov. 5 victory, which will send him back to the White House for a second, nonconsecutive term. The Republican has promised a menu of lower taxes and deregulation to boost growth.
Though the macro economy has shown solid growth through 2024, consumers remain stymied by price increases that spurred a cumulative increase in the consumer price index inflation gauge of more than 20% under President Joe Biden.
Even with the increase in sentiment, consumers’ inflation outlook is still cautious, according to the New York Fed survey.
Inflation expectations at the one-, three- and five-year horizons all increased 0.1 percentage point, rising to 3%, 2.6% and 2.9%, respectively. The Fed targets inflation at 2% but is still expected to lower its benchmark interest rate by a quarter percentage point when it meets next week.
Though Trump has made little mention of attacking the government’s debt and deficit load, the outlook there improved as well. The median expectation for growth in government debt was at 6.2%, down 2.3 percentage points from October and the lowest level since February 2020. More

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Citibank provided insights on the European Central Bank’s (ECB) potential monetary policy trajectory, suggesting that the risks are tilted towards a more prolonged cycle of interest rate cuts. Contrary to current market expectations, which anticipate a 50 basis point reduction in January or March and an end to the cutting cycle by mid-year, Citibank posits that a steadier cycle of 25 basis point increments may be more likely. Citibank’s analysis points to the mid-year period when markets expect the ECB to pause, which coincides with the anticipated maximum impact from Trump-era tariffs. In this context, Citibank predicts that dovish policymakers may favor a lower terminal rate over a quicker pace of rate reductions. Conversely, if hawkish voices prompt a pause, the rate-cutting cycle could resume later in response to persistent weak growth, encouraging investment.In terms of bond markets, Citibank’s base case is mildly bullish on German Bunds compared to forwards and consensus. The bank targets a yield trough of around 1.85% for 10-year Bunds by mid-year, followed by a rise to 1.95% in the fourth quarter of 2025. Citibank sees favorable risk-reward in certain futures positions and suggests tactical long positions in 5-year inflation-linked swaps.Regarding the € curve, Citibank’s terminal rate estimate remains 20 basis points more dovish than market consensus after November’s rally. The bank does not find the risk-reward in 2-year to 5-year curve steepeners appealing and suggests a strategy that would benefit from an out-steepening of the 10-year to 30-year segment versus the 5-year to 10-year segment, given a resilient macroeconomic environment.For European government bonds (EGBs), Citibank forecasts a spread of 60-70 basis points between 10-year French OATs and German Bunds in a bullish scenario, widening to 130-140 basis points in a bearish scenario. The bank maintains a structural long position on Spanish bonds versus French OATs and Belgian OLOs, and a tactical bearish stance on Italian BTPs. Citibank also favors a flattening position on the Spanish 10-year to 30-year curve versus French or Belgian bonds.In the UK, Citibank anticipates the possibility of accelerated Bank of England (BoE) rate cuts later in 2025, setting a target yield of 3.35% for 10-year gilts by year-end. The bank recommends long positions in 10-year gilts versus French OATs, maintaining short positions in 10-year gilt asset swap spreads, and is monitoring short positions in 5-year inflation-linked swaps.Finally, Citibank takes a slightly bearish stance on € SSA and covered bond swap spreads going into 2025 due to high net cash requirements (NCRs), but expects performance improvements in the first quarter of 2025. The bank advises buying 5-year KFW bonds versus Bunds and selling positions in 2.5-year versus 4.5-year CADES. Citibank forecasts a supply of €1278 billion in EGBs for 2025, resulting in an annual NCR (NYSE:VYX) of +€637 billion.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

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The money, which forms part of the EU’s Ukraine facility, will help Ukraine’s economy, as the country continues to fight against Russia.The G7 group of the world’s biggest economies have earmarked an overall loan of $50 billion for Ukraine, serviced by profits generated by Russian assets immobilised in the West.($1 = 0.9454 euros) More

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