CREDIT OPEN: Pace to pick up as Q4 gets underway
EU stocks look set to get the new month and quarter off to a positive start with markets clawing back some of the ground lost on Monday as a few chips were removed from the table following a string of recent gains.
Overnight, Japanese stocks have reversed a portion of yesterday’s steep losses after new PM Ishiba announced a snap election for 27th Oct just after the Nikkei closed on Monday. Mainland China markets were shuttered and will remain so for the rest of the week following a 8.48% gain for the CSI300 on Monday, which made for a 5-day/25.1% surge.
Ahead of Monday’s Wall Street close which saw S&P500 notch up another record high, Fed’s Powell said that he sees two 25bps rate cuts this year if the economy performs as expected. Markets scaled back easing bets as a result, tilting expectations that next month’s move will be a more measured 25bps affair (CME data currently indicates a 62% probability of 25bps cut on 7th Nov versus 38% for a 50bps reduction).
That’s not the view of all FOMC members though where Atlanta Fed’s Bostic said that he is open to another 50bps cut at the November meeting if data surprises to the downside.
Turning to today and the European schedule delivers prelim Sep Eurozone inflation where the consensus calls for a slowdown to 1.8% from a prior 2.2%. Also due is final PMI data.
That comes after Monday’s data showed that annual HICP in Germany and Italy slowed to 1.8% and 0.8% respectively in Sep to follow weaker than expected prints from Spain and France released last week.
With that, the probability of a 25bps cut by the ECB in October currently sits at around 90%, up sharply from around 25bps at the beginning of last week.
Stateside, the US JOLTS survey for Aug provides the first of this week’s US labour market anecdotes ahead of Friday’s NFP data.
Otherwise, another busy slate of central bank speakers includes Bank of England chief eco Pill.
Geopolitical risks also remain firmly in mind after Israel confirmed it had launched ‘limited’ ground operations against Hezbollah targets in Lebanon.
For more on latest developments see the European Breakfast Briefing.
Tuesday’s supply prospects
Issuance is expected to pick up Tuesday with a number waiting in the wings following recent mandates/roadshows. That after a slow start to the week for primary bond issuance where just four names jumped in with euro offerings on Monday. The quartet printed a combined EUR2.05bn and kicked off a week that is expected to yield an average EUR22.5bn of euro paper (excluding HY corps) according to our most recent issuance poll. Given Thursday’s German holiday (Unity Day) and Friday’s key US payroll print, the next couple of sessions will need to be busy to get us up to that average estimate.
** FCC Servicios Medio Ambiente EUR500m (exp) 7yr green
** Adecco Group EUR300m no grow 8yr
** Investitionsbank Berlin EUR500m no grow Sep 2029 social
** Schleswig- EUR500mn 7yr FRN
** Gemeinsame NRW Kommunen EUR 9yr sub-benchmark bond (Staedteanleihe No. 8)
** Aareal Bank EUR Apr 2030 covered
Three ex-SSA borrowers tapped the US public debt market Monday to bring the month of September to a close. Campbell Soup, Darden Restaurants and Union Electric combined to add USD2.35bn to the month’s total, which amounted to USD172.55bn, making it the tenth busiest ex-SSA issuance month on record. It also broke the all-time September ex-SSA issuance record of USD167.52bn set back in 2020. For more colour see THE ENDGAME.
What to watch today
** Key Data: SP Sep HCOB Manufacturing PMI (08:15), IT Sep HCOB Manufacturing PMI (08:45), FR Sep F HCOB Manufacturing PMI (08:50), GE Sep F HCOB Manufacturing PMI (08:55), EC Sep F HCOB Manufacturing PMI (09:00), UK Sep F S&P Global Manufacturing PMI (09:30), EC Sep P CPI (10:00), US Sep F S&P Global Manufacturing PMI (14:45) and US Sep ISM Manufacturing/Prices Paid (15:00)
** Key Events: ECB’s Guindos (08:00), Nagel (08:00), Rehn (09:00) & Schnabel (16:30), BoE’s Pill (15:00), as well as Fed’s Bostic (16:00 & 23:15), Barkin (23:15) & Collins (23:15) all speak
** Auctions: UK to sell GBP2.25bn 2043 Gilts (10:00) and GE to sell EUR4bn 2026 Bobls (10:30)
** Earnings: 4 S&P500 companies report
** Holidays: Chinese National Day
All times BST
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