CREDIT OPEN: Misery loves company
EU stocks look set for stiff opening losses as US slowdown concerns continue to swirl that were exacerbated by Friday’s weak US employment report. Given that labour market data is regarded as a lagging indicator, that’s naturally adding to concerns that the Fed is behind the curve, with the result being that markets are now pricing in more than 50bps of cuts by the Fed at its September meeting.
Rate dynamics, along with unwinds of leveraged plays have been helping to propel JPY higher again today with Nikkei dumping almost 13%, making for a 3-day 20% slump. US index futures are down sharply, led by tech, setting up the cash Nasdaq index for a fall deeper into correction territory when markets open later today while 10yr the US yield is down another 11bps from NY closing levels, making for an 8-day drop of up to 60bps. Also to note, Brent is down to its lowest since January while the broader commodity complex is also weaker, with concerns over sluggish demand from China also in the mix.
As if that wasn't enough to contend with, geopolitical concerns also remain in mind where Israel is bracing for potential retaliatory strikes following the assassinations of two militant leaders, with fears growing over all-out regional conflict.
Given market gyrations, this morning's mixture of final and first time service PMI readings for July could struggle to exert a material impact. Later comes US ISM services where the BBG consensus calls for a rise in July to 51.0 (prior 48.8)
There's no supply today while it's a slower day for earnings where 2 Stoxx600 & 7 S&P500 companies report (a total of 65 & 78 members of the respective indices report this week).
For more on latest developments see the European Breakfast Briefing
Monday’s supply prospects
Given the dreadful tone and the obvious seasonal factors, prospects for the primary market look limited to say the least as the first full week of August gets underway. That comes after Friday saw Berlin Hyp's EUR100m digital covered bond transaction top up the weekly single currency haul to EUR7.92bn, up from the year-to-date low of just EUR1.375bn set the previous week. It was the corporate (ex-HY) sector which led the way with EUR4bn of the total volume and six of the twelve tranches to price. For the full breakdown of the week’s euro issuance by asset class and maturity, see IGM’s WEEKLY VOLUME
Stateside, despite the thirteenth "zero" ex-SSA issuance day of the year, last week’s high grade issuance topped the average Street estimate for the twenty-third time this year. Coming into last week, the respondents to our weekly issuance poll were looking for, on average, USD27bn in new debt to be raised, while 23 borrowers combined to raise USD31.125bn. For a more comprehensive look at last week's issuance trends in the US primary bond market see IGM's IG WEEKLY WRAP UP.
What to watch today (and for the week)
** Key Data: SP Jun Industrial Production (08:00), SP Jul HCOB Composite/Services PMIs (08:15), IT Jul HCOB Composite/Services PMIs (08:45), FR Jul F HCOB Composite/Services PMIs (08:50), GE Jul F HCOB Composite/Services PMIs (08:55), EC Jul F HCOB Composite/Services PMIs (09:00), EC Aug Sentix Investor Confidence (09:30), UK Jul F S&P Global Composite/Services PMIs (09:30), EC Jun PPI (10:00), US Jul F S&P Global Composite/Services PMIs (14:45) and US Jul ISM Services Index (15:00)
** Key Events: Fed’s Goolsbee (13:30) & Daly (22:00) speak
** Auctions: No major term auctions scheduled for Monday 5th Aug
** Earnings: 2 Stoxx600 & 7 S&P500 companies report
** Viewpoint - The week ahead:
- US Senior Loan Officer Opinion Survey on lending practices (Monday)
- RBA to hold at 4.35% (Tuesday). Rate hike off the table for now
- Japan June earnings/household spend (Tuesday). BoJ summary of opinions (Friday)
- US July services ISM (Monday). June consumer credit (Wednesday). Jobless claims (Thursday)
- BoC Summary of Deliberations (Wednesday). Canadian July labour market report (Friday)
- German June factory orders (Tuesday), IP/trade (Wednesday)
- June Spain IP (Mon). June EMU retail sales (Tue). June Italian (Tue), French (Wed) trade
All times BST
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