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CREDIT OPEN: Pipeline empty but strong tone tempting?

By David Corbell March 21 2024 at 07:22

EU stocks are in line for hefty opening gains this morning as European markets catch up to Wall Street positivity seen after the Fed signalled that it remains on course to cut 75bps off rates this year.

Notably, the Fed's 2024 growth forecast was upped substantially to 2.1% (from a prior 1.4%) while the headline inflation forecast was unchanged, although the core PCE deflator forecast was upped to 2.6% vs 2.4% in December.

That's all boosted Asian markets too where the Nikkei firmed 2.03% to a record high, Hang Seng jumped as much as 2.6% while US index futures are also firmly in the green with the latter teeing up another potential record high on S&P500.

After the Fed's meeting, conviction in a June cut has strengthened significantly with markets currently indicating a 72% probability of a 25bps reduction (CME data), up from around 55% prior to the verdict.

Turning to today and the central bank focus turns to the BoE which comes after yesterday's inflation data showed that annual CPI cooled by more than expected in Feb to an over 2yr low of 3.4%. SNB and Norges Bank also release their latest verdicts. All three central banks are seen as holding steady this time around.

It's also a big day for EU auction supply where Spain and France bring up to EUR21bn in mostly conventional paper while Ireland brings 2034 & 2043 gilts and US sells 10yr TIPs.

PMIs are on tap for Germany, France, the Eurozone, the UK and the US with the latter also releasing initial jobless claims and existing home sales data.

Company news remains a potential driver of sentiment where 9 Stoxx600 firms are updating investors this morning.

For more on latest developments see the European Breakfast Briefing.

Thursday's supply prospects

The public euro pipeline is empty coming into today's session but with risk markets rallying in the wake of the FOMC we expect to see some opportunistic supply emerge. That after the fast issuance pace continued Wednesday as another batch of issuers (from the pipeline and opportunistic) came out to raise a combined EUR9.85bn. However, the main talking points on the day were generated by US corporate Equinix (EUR long 9yr green) and Austrian banking group Raiffeisen Bank International (EUR650m PNC5.25 AT1) which postponed their trades during the execution process after some negative press headlines (more here).

As expected, US high grade corporate borrowers went on a one-day sabbatical - the third zero issuance day of the year - as they waited to see what the Fed has in store with regards to its monetary policy going forward. That left high grade issuance for the week at USD25.15bn, just shy of the average weekly estimate of USD27.5bn, a figure we expect will be surpassed today when issuance resumes. For more details see THE ENDGAME.

What to watch today - Frenetic session in store

** Key Data: FR Mar Business/Manufacturing Confidence (07:45), FR Mar P HCOB Composite/Manufacturing/Services PMIs (08:15), GE Mar P HCOB Composite/Manufacturing/Services PMIs (08:30), EC Mar P HCOB Composite/Manufacturing/Services PMIs (09:00), UK Mar P S&P Global Composite/Manufacturing/Services PMIs (09:30), US Q4 Current Account Balance (12:30), US Weekly Initial/Continuing Jobless Claims (12:30), US Mar Philly Fed Business Outlook (12:30), US Mar P S&P Global Composite/Manufacturing/Services PMIs (13:45), US Feb Leading Index (14:00) and US Feb Existing Homes Sales (14:00

** Key Events: BoE Rate decision (12:00) and Fed s Barr speaks (16:00)

** Auctions: SP to sell EUR5.5-6.5bn of 2027, 2032 & 2043 Bonds (09:30). FR to sell EUR11.0-12.5bn 2027, 2029 & 2031 OATs (09:50), as well as EUR1.5-2bn 2029, 2036 & 2040 Linkers (10:50). IR to sell EUR1bn 2034 & 2043 gilts (10:00). US to sell USD16bn 10yr TIPs (17:00)

** Earnings: 9 Stoxx600 & 6 S&P500 companies report

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