CREDIT OPEN: Pipeline empty but opportunistic supply possible

EU stocks look set for modest opening gains on Tuesday with markets seemingly in wait-and-see mode ahead of key incoming US data.

Wall Street closed narrowly mixed ahead of today’s US PPI report and ensuing CPI update, following which Nikkei rose by up to 3.21% following the holiday weekend in Japan. Tech has been leading the Nikkei's advance with sentiment helped by a relatively stable JPY. Today’s rally also means that Nikkei has now entirely scrubbed last week’s loss which included a historic 12.4% plunge last Monday.

Elsewhere, oil is easing back after Brent jumped 3.31% Monday on rising Middle East tensions.

Ahead of today's US PPI update, UK labour market statistics are in the spotlight where a significant slowing in regular and headline pay growth is expected in June.

The German Aug ZEW Expectation index is expected to see its first MoM decline since last July.

Central bank-speak will be solely headlined by Atlanta Fed's Bostic.

Supply comes from UK and Germany in what is currently a calm rates complex.

Earnings are still a focus but are mainly a European story where 10 Stoxx600 companies release results this morning followed by Home Depot which reports from the S&P500 index before the US open.

For more on latest developments see the European Breakfast Briefing.

Tuesday’s supply prospects

The public pipeline is empty again as we approach Tuesday’s session, but we can’t out rule something popping up in the way of opportunistic supply despite summer vacations heavily thinning out market participation. That after it was once again left to the IG corporate bond market to provide the primary focus Monday, as German automaker Mercedes-Benz priced the day’s only trade. That came in the form of a 3yr floating-rate issue which was announced as EUR500m in size at a spread of 3mE+48 from the get-go and likely driven by a big anchor/reverse enquiry order – more details here.

US high-grade borrowers rushed to get to market before Wednesday’s July CPI print as 16 issuers raised USD18.1bn. While CPI may interrupt the flow of issuance mid-week, Monday’s haul was a good start to a week that, on average, is expected to produce USD30bn in new supply. For more colour see THE ENDGAME.

What to watch today

** Key Data: UK Jun ILO Unemployment Rate (07:00), UK Jun Average Weekly Earnings (07:00), UK Jul Payrolled Employees Monthly Change (07:00), SP Jul F CPI (08:00), GE Aug ZEW Survey (10:00), US Jul NFIB Small Business Optimism (11:00) and US Jul PPI Final Demand (13:30)

** Key Events: Fed’s Bostic speaks (18:15)

** Auctions: UK to sell GBP3bn 2038 Gilts (10:00) and GE to sell EUR5bn 2026 Schatz (10:30)

** Earnings: 10 Stoxx600 companies release results. Home Depot reports from the S&P500

All times BST

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