Americas Breakfast Briefing
US OPEN/EVENTS AHEAD
Markets were sedate overnight as all Japanese financial products traded domestically are closed for 'Autumnal Equinox Day'. Late Friday, Fed Waller's comments were seen as dovish as he stressed that he would consider another 50bps rate cut i if the Jobs market worsens &, if data comes in soft, he is more willing to cut aggressively. He added that estimates indicate core PCE is running below target & inflation is softening much faster than expected. Fed Bowman warned that the 50bps cut last week could been seen as an early declaration of victory & she preferred a measured pace to avoid stoking demand, hence why she dissented. Today sees the Fed's Bostic, Goolsbee & Kashkari. Second half data brings Chicago Fed National Activity Index which is seen at 48.6 from 47.9 & US Sep preliminary Mfg PMI f/c to firm to 48.6 from 47.9 & Services f/c to ease to 55.2 from 55.7. Asian stocks hit between 2wk & 3mth highs on Chinese stimulus hopes before paring gains & S&P futures are flat in EZ flows. US 2-10yr yield spread has steepened to a 27.5mth wide of 17.6 bps with a target at 22.0bps.
- The US 2/10yr spread builds on the recent two-year base completion to post new 2-1/4yr highs above 17 (16 June 2022 high)
- Constructive studies (note the '75% higher' rating on this week's Sentiment Matrix) and the recent Golden Cross (50/200DMAs) should underpin continued steepening
- Above 20 (.764x -111/-11 advance from -56) suggests scope to 25 (50% retracement of the 162/-111 decline), perhaps 32 (31 May 2022 lower high) on extension
- Support between -2/-6 (18/6 September lows) should limit dips and only below cautions immediate steepening
EUROPEAN ROUND UP
Yield spread activity has been centre stage in the first half today. The German/UK 10yr differential widened out to 173.6bps at most with players continuing to target the 4.5mth wide at 174.4bps from the 29th August. The move has been driven by Dec24 Bunds outperforming their UK counterpart by as much as 1/2pt. Also in the spotlight is the German 2-10yr yield spread which dis-inverted for the first time since November 2022 (to 0.6bps at one point) with players now heavily targeting the 50% Fibonacci retracement level of the 2022-2023 flattening at 2.1bps. Turning to data, apart from French Sep preliminary Manufacturing PMI which improved from prior (but missed the consensus forecast), all the other Mfg & Services PMI releases (German, EC & UK) all moderated from last time and missed expectations. Turning to risky assets, core equity indices softened to between 5 & 9 day nadirs although Germany's DAX has since bucked the slightly softer bias. Front month Brent futures have traded in a tight range & are little moved & Gold made a record apex at $2631.4/oz.
- The German 2/10yr spread builds on the very recent 22-month base confirmation to dis-invert for the first time since November 2022
- Firming studies (note the 75% higher' rating on this week's Sentiment Matrix) and the recent 50/200DMA bull crossover suggest further steepening
- Above 2.1/6.3 (50% retrace of 89.1/-84.8, 2022-23 decline and equality of -84.8/-17.5 from -60.9) targets closure of the gap down from 10.6 (7 November 2022 low)
- The -13.7/-10.5 zone (4/13 September troughs) should limits any near-term flattening and only below delays broader steepening for -20.8 (16 August reaction low)
MARKET HEADLINES
- German 2-10yr yield spread dis-inverts for first time since Nov 2022
- US 2-10yr yield spread out to a wide since June 2022
- Bunds advanced to 5 day high
- Bunds outperform Bunds by as much as 2/5pt
- German/UK 10yr yield spread hits 172.2bps vs 4.5mth wide at 174.4bps
- Spot Gold makes record high at $2631.4/oz
- French Sep preliminary Manufacturing PMI 44.0 from 43.9 vs 44.2 f/c
- French Sep prelim Services PMI 48.3 from 55 vs 53.1 expected
- German Sep prelim Mfg & Services PMIs softened/missed forecasts
- EC Sep prelim Mfg & Services PMIs declined & missed predictions
- UK Sep prelim Mfg & Services PMIs weakened, missed expectations
- UK CBI Trends Total Orders fell to -35 from -22 vs -23 f/c
- EU sold EUR 2.494bn 2.875% 2029 Oct 2029 bonds at 2.491% & 1.28 b/c
- EU sold EUR 2.326bn 4% Apr 2044 bonds at 3.287% & 1.36 b/c
- FTSE hit a 9 day low, DAX a 6 day base & CAC a 5 day nadir
DAY AHEAD
| GMT | Code | Name | Actual | Period | Consensus | Previous | |
|---|---|---|---|---|---|---|---|
| Monday, September 23rd | |||||||
| 04:30 | NL | Gross Domestic Product n.s.a (YoY) | 0.8% | Q2 | 0.8% | 0.8% | |
| 04:30 | NL | Gross Domestic Product s.a (QoQ) | 1% | Q2 | 1% | 1% | |
| 05:00 | IN | HSBC Composite PMI | 59.3 | Sep | 60.7 | ||
| 05:00 | IN | HSBC Services PMI | 58.9 | Sep | 60.9 | ||
| 05:00 | IN | HSBC Manufacturing PMI | 56.7 | Sep | 57.5 | ||
| 05:00 | SG | Consumer Price Index (YoY) | 2.2 | Aug | 2.4 | ||
| 06:00 | QA | Consumer Price Index (MoM) | Aug | -0.38% | |||
| 06:00 | QA | Consumer Price Index (YoY) | Aug | 0.22% | |||
| 06:00 | KW | Consumer Price Index (MoM) | Aug | 0.15% | |||
| 06:00 | KW | Consumer Price Index (YoY) | Aug | 3% | |||
| 06:00 | DK | Industrial Outlook | 3 | Sep | -1 | ||
| 06:30 | HU | Gross Wages (YoY) | 13.9% | Jul | 13.3% | ||
| 07:00 | QA | M2 Money Supply | 6.7% | Aug | 6.4% | ||
| 07:00 | EMU | ECB's Elderson speech | |||||
| 07:15 | FR | HCOB Manufacturing PMI | 44 | Sep | 44 | 43.9 | |
| 07:15 | FR | HCOB Services PMI | 48.3 | Sep | 52.7 | 55 | |
| 07:15 | FR | HCOB Composite PMI | 47.4 | Sep | 53.1 | ||
| 07:30 | DE | HCOB Composite PMI | 47.2 | Sep | 48.2 | 48.4 | |
| 07:30 | DE | HCOB Services PMI | 50.6 | Sep | 51 | 51.2 | |
| 07:30 | DE | HCOB Manufacturing PMI | 40.3 | Sep | 42.4 | 42.4 | |
| 08:00 | PL | Retail Sales (YoY) | 3.2% | Aug | 5% | ||
| 08:00 | EMU | HCOB Services PMI | 50.5 | Sep | 52.4 | 52.9 | |
| 08:00 | EMU | HCOB Manufacturing PMI | 44.8 | Sep | 45.6 | 45.8 | |
| 08:00 | EMU | HCOB Composite PMI | 48.9 | Sep | 50.6 | 51 | |
| 08:30 | GB | S&P Global/CIPS Manufacturing PMI | 51.5 | Sep | 52.3 | 52.5 | |
| 08:30 | GB | S&P Global/CIPS Services PMI | 52.8 | Sep | 53.5 | 53.7 | |
| 08:30 | GB | S&P Global/CIPS Composite PMI | 52.9 | Sep | 53.8 | ||
| 10:00 | IL | Industrial Production (MoM) | Jul | -0.9% | |||
| 12:00 | MX | Retail Sales (MoM) | Jul | -0.5% | |||
| 12:00 | MX | Retail Sales (YoY) | Jul | -0.5% | -3.9% | ||
| 12:00 | PL | M3 Money Supply (YoY) | Aug | 8% | 8.3% | ||
| 12:00 | US | Fed's Bostic speech | |||||
| 12:30 | CA | New Housing Price Index (MoM) | Aug | 0.1% | 0.2% | ||
| 12:30 | CA | New Housing Price Index (YoY) | Aug | 0.1% | |||
| 13:00 | EMU | ECB's Cipollone speech | |||||
| 13:45 | US | S&P Global Services PMI | Sep | 55.2 | 55.7 | ||
| 13:45 | US | S&P Global Composite PMI | Sep | 54.6 | |||
| 13:45 | US | S&P Global Manufacturing PMI | Sep | 48.5 | 47.9 | ||
| 14:00 | AE | Private Sector Loans | Jul | 7.78% | |||
| 14:15 | US | Fed's Goolsbee speech | |||||
| 15:30 | US | 6-Month Bill Auction | 4.41% | ||||
| 15:30 | US | 3-Month Bill Auction | 4.75% | ||||
| 15:30 | EMU | ECB's Cipollone speech | |||||
| 17:00 | TH | Prince Mahidol Day | |||||
| 17:00 | US | Fed's Kashkari speech | |||||
| 21:00 | KR | Producer Price Index Growth (MoM) | Aug | 0.3% | |||
| 21:00 | KR | Producer Price Index Growth (YoY) | Aug | 2.6% | |||
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