CREDIT OPEN: Milton makes landfall, stocks rally ahead of US CPI
Thursday's handover to the European session looks like it should be a positive one with gains of between 0.6% and 1.03% from the main US indices (led by DJIA) despite news that hurricane Milton was wreaking havoc in large areas of Florida. Asian stocks also surged ahead on the expectation of further stimulus measures to be announced by the Chinese finance ministry on Saturday. Advances were keen for the CSI index (+2.7%) although off-shore shares outperformed with Hang Seng up around +4% at the time of writing.
To recap matters from Wednesday, the US data docket was light, leaving participants focusing on the minutes of the Fed's September FOMC meeting. A “substantial majority” supported kicking off the easing cycle with a 50bps cut, but there was also a decent amount of debate for staying with a more modest 25 bp cut. The idea being that a smaller cut would allow more time to assess the degree of restrictiveness in the current policy. OIS market are pricing in ~20bps of rate cuts for the November FOMC meeting, pointing to a ~80% odds of a 25 bps rate cut (much lower than the ~31 bps seen before the release of the US NFPs last Friday).
In Europe, participants will today be looking to the ECB's monetary policy account from the September meeting for hints on another rate cut in October. Recall that CPI has fallen below the ECB's 2% target for the first time since 2021, while deterioration in businesses has been noted in multiple surveys - which likely point to the need for easier monetary policy.
Turning to NY hours, the main highlight will be the much-anticipated US CPI report for September were it is expected we'll see a more subdued headline number (2.3% consensus), extending the downtrend seen in the gauge for a sixth consecutive month. The core figure is expected to remain unchanged at 3.2% YoY.
US earnings season continues its slow build with updates from two household names - Domino's Pizza Inc and Delta Air Lines Inc - before the market opens. Later in the day the United States moves to the longer end of the curve with its latest funding round looking to raise USD22bn of 30yr bonds.
The day's central bank speak is headlined by Fed Governor Cook, NY Fed Pres Williams and Richmond Fed Pres Barkin.
For more on latest developments see the European Breakfast Briefing.
Thursday’s supply prospects
Coming into today’s session and the weekly euro haul (excluding HY corps) is already at EUR27.85bn and beyond the average EUR27.5bn supply forecast put forward by participants in our weekly issuance survey. We are not done just yet either, with a handful of names already in the pipeline after recent mandates, whilst further opportunistic supply can’t be ruled out given the strong reception this week’s deals have seen so far:
** State of Baden-Wuerttemberg EUR500m no grow 5yr LSA FRN
** Tornator expected EUR300m 7yr secured green
** Kookmin Bank EUR 3.25yr sustainable covered
** AS LHV Pank EUR250m no grow 4yr covered
The only market participants concerned about Hurricanes and Middle East tensions on Wednesday appeared to be high grade issuers. With stock markets rallying only three ex-SSA borrowers tapped the markets together with USD2.4bn in new supply and bringing issuance for the week to USD15.75bn. See THE ENDGAME.
What to watch Thursday
** Key Data: IT Aug Industrial Production (09:00), US Sep CPI (13:30) and US Weekly Initial/Continuing Jobless Claims (13:30)
** Key Events: ECB Sep Meeting Minutes (12:30), Fed’s Cook (14:15), Barkin (15:30) and Williams (16:00) speak
** Auctions: US to sell USD22bn 30yr Bonds (18:00)
** Earnings: 1 Stoxx600 & 2 S&P500 companies report
All times BST
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