CREDIT OPEN: Front loaded week in prospect for primary
Battered EU stock bulls look set for some modest relief this morning but whether that lasts remains to be seen as markets try to regroup following a flurry of disappointing data releases last week that stoked US slowdown concerns.
Notably, weaker-than-expected US payroll growth in August, coupled with downward revisions to prior months' data, pulled US stocks and yields sharply lower Friday to the extent that the S&P500 and Nasdaq shed a total of 3.28% and 4.71% on the week respectively.
Markets have been looking for softer data to justify rate cuts, but recent data has evidently been deemed too weak to support the Goldilocks thesis, or indeed valuations given the huge run-up from the early August lows.
Friday’s Wall Street negativity unsurprisingly spread into Asian markets today where Hang Seng has been leading declines with sentiment also undermined by slower than expected annual China CPI which edged up to 0.6% in Aug, above the prior 0.5% but below the 0.7% BBG consensus.
After last week delivered a string of top-tier data releases, Monday’s schedule is strictly second tier, leaving thoughts on key updates due later in the week, including US CPI on Wednesday.
Auction supply is off the agenda Monday too, as is CB speak where the ECB is already in its quiet period ahead of Thursday’s policy meeting while the Fed entered blackout on Saturday on approach to its next verdict due on 18th Sep, ahead of which markets are ascribing a 71% probability to a 25bps cut vs a smaller 29% of chance of a 50bps cut (CME data).
Firing the final rhetorical bullets before blackout, Fed Governor Waller said that the job data "requires action" while NY Fed Pres Williams said “it is now appropriate to dial down the degree of restrictiveness in the stance of policy by reducing the target range for the federal funds rate".
For more on latest developments see the European Breakfast Briefing.
Monday’s supply prospects
Our survey respondents anticipate a front-loaded week to precede the upcoming ECB meeting and put forward an average combined single currency supply estimate of EUR34bn. SSAs are expected to lead from the front where the European Union is waiting in the wings with its latest issue. That after non-covered FIG issuers led a EUR36.57bn week last week (with EUR12.12bn from 20 lines), which fell well behind the previous week’s EUR55.9bn and was also slightly short of the EUR38.5bn average weekly estimate.
** European Union EUR offering
** Munich EUR250m debut green
** Macquarie Bank EUR short-to-intermediate green snr
In just three trading sessions, 59 ex-SSA issuers combined to raise a staggering USD80.575bn in the US last week. That made last week (1) the busiest issuance week of the year by more than USD20bn (2) the sixth busiest week of all time and (3) the highest number of issues priced in a single week. Tuesday (USD43.275bn) was the busiest ex-SSA issuance day of the year, and the third busiest day of all time. For a more comprehensive look at last week's issuance trends in the US primary bond market see IG WEEKLY WRAP UP.
What to watch today (and for the week)
** Key Data: EC Sep Sentix Investor Confidence (09:30), US Jul F Wholesale Inventories (15:00) and US Jul Consumer Credit (20:00)
** Key Events: No key events scheduled for Monday 9th Sep
** Auctions: No major term auctions scheduled for Monday 9th Sep
** Viewpoint - The week ahead:
- ECB to cut 25bp (Thursday). New staff forecasts
- FOMC enters the pre-September meeting quiet period
- US August CPI (Wednesday). August PPI/claims (Thursday). August import prices (Friday)
- UK Labour market report (Tuesday). July GDP (Wednesday)
- Sweden July GDP indicator/household consumption/private production (Tuesday). August CPIF (Thursday)
- Norway August CPI (Tuesday). Q3 Network Survey (Thursday)
- China trade (Tuesday)
All times BST
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