CREDIT OPEN: Pipeline still looking busy
EU stocks look set to remain on the backfoot at this morning’s open, setting up major European indices for a potential third straight loss as a few more chips are removed from the table to follow the hugely impressive rally off the early August lows.
US data this week was billed as pivotal and is so far living up to expectations in that respect with Tuesday’s weaker-than-expected ISM manufacturing data followed by yesterday’s over 3yr low print on JOLTs, boosting easing bets to the extent that a 25bps or 50bps cut by the Fed is now viewed as a virtual coin toss by markets.
Overnight, the Nikkei has been underperforming against a backdrop of ongoing JPY strength. BOJ’s Takata emphasized the need for another rate hike if inflation continues to align with the BOJ’s outlook. Conversely, Fed’s Daly joined those Fed officials already espousing easing, saying that the Fed needs to cut rates due to concerns about labour market conditions.
With yesterday’s US data, the more notable moves came in rates where the 2yr US yield plunged by 11bps on the day as markets upped easing bets. Moves in US stocks were relatively tame with S&P500 and Nasdaq shedding a respective 0.16% & 0.30% to follow steeper declines seen Tuesday that were partly driven by tech jitters after reports that Nvidia had been subpoenaed in connection with a DoJ anti-trust probe, something that the chipmaker has subsequently denied.
Turning to the session in prospect and it’s a big day for auction supply where Spain and France sell a combined total of up to EUR18.75bn in mostly conventional paper while UK brings GBP4bn gilts.
This morning’s data won’t trouble go/no-go calls. Already out, German Factory Orders saw a surprise MoM rise of 2.9% in July, way above the -1.7% BBG survey consensus, while June was revised up to 4.6% from a prior 3.9%.
Later attention will remain on the US labour market where ADP Employment and Jobless Claims provide the final anecdotes ahead of Friday’s NFP print. ISM services data is also on tap.
For more on latest developments see the European Breakfast Briefing.
Thursday’s supply prospects
The public pipeline remains busy going into today’s session, with some issuers having announced fresh mandates or wrapped up roadshows on Wednesday. There are also a couple of names which could have pulled the trigger yesterday but decided to hold off given the delicate broader market backdrop. Despite yesterday’s challenging tone, 11 issuers did decide to forge ahead with euro funding plays (along with one each in GBP & USD), and printed EUR7.92bn on the back of what was strong demand. The euro activity in turn lifted the weekly single currency haul to EUR28.42bn and closer to the average weekly estimate of EUR38.5bn.
** SEK USD 3yr global at SOFR m/s +43 area IPTs
** CADES USD 3yr at SOFR m/s +43 area IPTs
** IDA USD 7yr SDB at SOFR m/s +53 area IPTs
** Munich EUR250m debut green
** SES EUR 30NC5.25 & 30NC8 two-part hybrid
** Pearson Funding GBP 10yr education bond
** Anglian Water GBP 20yr green secured
** Macquarie Bank EUR short-to-intermediate green snr
** PKO Bank Polski EUR 3NC2 green SNP debut
** Triodos EUR300m (exp) 5NC4 green snr pref
** Aareal Bank EUR400m no grow 10.25NC5.25 Tier 2
** United Overseas Bank GBP 3yr SONIA-linked covered
In just two days, 48 borrowers through 86 tranches have raised USD71.925bn in the US, blowing away all weekly estimates. That already makes this week the busiest ex-SSA US issuance week of the year and the seventh busiest week on record. Nineteen issuers raised USD26.85bn Wednesday to go along with Tuesday’s record breaking 29, who raised USD43.275bn. See THE ENDGAME.
What to watch today
** Key Data: UK Aug S&P Global Construction PMI (09:30), EC Jul Retail Sales (10:00), US Aug ADP Employment Change (13:15), US Q2 F Nonfarm Productivity (13:30), US Q2 F Unit Labor Costs (13:30), US Weekly Initial/Continuing Jobless Claims (13:30), US Aug F S&P Global Composite/Services PMIs (14:45) and US Aug ISM Services Index (15:00)
** Key Events: ECB’s Holzmann speaks (15:00)
** Auctions: SP to sell EUR5-6bn 2027, 2029 & 2030 Bonds, as well as EUR250-750m 2030 Linkers (09:30), FR to sell EUR10-12bn 2034, 2036, 2040 & 2055 OATs (09:50) and UK to sell GBP4bn 2029 Gilts (10:00)
** Earnings: 5 Stoxx600 & 1 S&P500 company report
All times BST
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