CREDIT OPEN: Firmer start eyed to an event packed session

EU stocks look set for a firmer start to August having closed out the final session of July with gains that took the Stoxx600 higher by 0.8%, sufficient to produce a slender monthly gain of 0.47%.

That follows Wednesday’s Wall Street tech led rebound where Fed rate cut optimism also helped drive bumper gains for Nasdaq (+2.64%) and S&P500 (+1.58%). Fed’s Powell said a Sep cut was “on the table” subject to data confirming a satisfactory trajectory on inflation. US index futures suggest those gains will extend at today’s open with Meta popping after hours on an earnings beat.

Wall Street buoyancy hasn’t lifted Asian markets though, notably Nikkei which dumped by up to 3.5% amid ongoing JPY strength following Wednesday’s BoJ hike. Also to note, China’s Caixin manufacturing PMI unexpectedly fell into contraction at 49.8 (prev 51.8), echoing the weakness seen in official PMI data.

Middle East tensions also remain in mind where front month Brent futures firmed up to 1.15% to a 3 day high after Iran's supreme leader ordered an immediate retaliatory attack on Israel.

Top of today’s event list is the BoE meeting, ahead of which, OIS data (via BBG) indicates that markets are pricing a 59% probability of a cut. That suggests a decent reaction is likely whichever way the MPC lean today, although a move to a less restrictive policy setting is very much seen as a when and not if scenario.

Otherwise, today is another very busy one for corporate news where 40 Stoxx600 & 55 S&P500 firms are reporting.

Data comprises UK & eurozone final July manufacturing PMI, accompanied by first time readings from peripheral countries, while US reports manufacturing ISM and jobless claims

Spain and France offer up to EUR17.25bn in mostly conventional supply which will provide a key test of demand following the recent dump in yields which took the 10yr German yield to its lowest level seen since March on Wednesday. The 10yr US yield dumped a hefty 10bps on Wednesday, making for a 5-day/25.4bps drop.

For more on latest developments see the European Breakfast Briefing.

Thursday’s supply prospects

The IG pipeline is empty ahead of today’s session, but HY name Ocado is expected to print a GBP350m 5NC2 line despite the BoE distraction. That after the risk-on tone Wednesday tempted corporate borrower Compagnie de Saint-Gobain to the market with a new EUR1.5bn two-part issue, which found plenty of buyers with combined demand peaking at EUR5.2bn (EUR4.15bn final) and allowing the borrower to print paper 30bps inside IPTs and with a 5bp NIC on each tranche.

** Ocado GBP350m 5NC2

Wednesday marked the thirteenth “zero” issuance day of the year in the US, leaving Jul issuance at USD125.504bn – the second highest for the month of Jul on record. For more see THE ENDGAME.

What to watch Thursday – BoE verdict headlines busy session

** Key Data: SP Jul HCOB Manufacturing PMI (08:15), IT Jul HCOB Manufacturing PMI (08:45), FR Jul F HCOB Manufacturing PMI (08:50), GE Jul F HCOB Manufacturing PMI (08:55), EC Jul F HCOB Manufacturing PMI (09:00), IT Jun Unemployment Rate (09:00), UK Jul F S&P Global Manufacturing PMI (09:30), EC Jun Unemployment Rate (10:00), US Q2 P Nonfarm Productivity (13:30), US Weekly Continuing/Initial Jobless Claims (13:30) , US Jul F S&P Global Manufacturing PMI (14:45), US Jun Construction Spending (15:00) and US Jun ISM Manufacturing/Prices Paid (15:00)

** Key Events: BoE Rate decision (12:00) & Gov Bailey presser (12:30). BoE decision maker panel survey (14:00) also out, whilst BoE’s Pill also speaks (17:00)

** Auctions: SP to sell EUR5-6bn of 2027, 2034 & 2044 Bonds, as well as EUR250-750m 2027 Linkers (09:30). FR to sell EUR9-10.5bn of 2034, 2038, 2043 & 2055 OATs (09:50)

** Earnings: 40 Stoxx600 & 55 S&P500 companies report, including Apple Inc

All times BST

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