CREDIT OPEN: Pre-payroll paralysis for primary?
EU stocks look set for a steady start to Friday’s payroll session as markets attempt to stabilise following Thursday’s dreadful session for both stocks and bonds.
US indices fared particularly badly as weakness in big tech weighed on Nasdaq (-2.76%) and S&P (-1.86%) with those losses enough to make it a red October for both indices while also bringing a 5-month win streak to an end for the S&P.
Following that, HK and mainland China equities improved overnight although Nikkei fell as players adjusted positions ahead of payrolls and next week’s US election. Hang Seng is currently up around 0.8% while Nikkei closed 2.63% in the red. Elsewhere, US treasuries have stabilised during Asian hours, likely reflecting some short covering following recent weakness.
Otherwise to note, and following after-hours earnings updates, stock in Apple is down, partly chalked to concerns over future sales following a tepid forecast, while Amazon is up on a profit beat.
Turning to the main event and US NFPs are expected to show that the pace of job creation moderated sharply in Oct (BBG median +100K; Sep +254K) although the whisper number is higher. Average hourly earnings are forecast to increase at a marginally slower rate. Also due is the Oct ISM manufacturing survey where a slight improvement is expected, albeit to a still contractionary level of 47.6.
Ahead of that comes UK manufacturing PMI. Already out, UK Oct Nationwide House Prices showed a smaller than expected MoM rise of 0.1%, leaving the YoY change at 2.4%.
Aside from payrolls, residual month-end flows also add to the potential for volatility and/or erratic price action today.
Crude prices will also be in focus into the weekend where Brent is up to 1.6% firmer today following reports that Iran is preparing a retaliatory strike on Israel from Iraq.
There’s no major auction supply on tap but it will be worth keeping an eye on gilts after the post-budget sell-off and fiscal jitters intensified Thursday to push the 10yr UK yield up to 17.9bps higher to a fresh YTD peak of 4.53% before closing at 4.45%.
For more on latest developments see the European Breakfast Briefing.
Friday’s supply prospects
The pipeline is currently empty going into the final session of the week and the first day of November. Given the sharp sell-off in stocks and bonds on Thursday, we are not expecting anything to pop up on Friday either. That after euro supply was limited to EUR2.375bn on Thursday via deals from IG-rated LVMH and a duo of previously pipelined high-yield names. They put the overall weekly single currency haul at EUR25.125bn, still short of last week’s final EUR28.975bn. Of this week’s total IG issuers have accounted for EUR22.75bn, comfortably more than the EUR19.5bn average guess recorded in our latest issuance poll.
While US high-grade corporate issuance ended the month on a high note, with 10 issuers raising USD20.55bn over the last couple of sessions, the same cannot be said for the broader markets where the three major indices suffered through their worst day in months and Treasury yields continued to rise. For more colour see THE ENDGAME.
What to watch today - US payrolls
** Key Data: UK Oct F S&P Global Manufacturing PMI (09:30), US Oct Change in Nonfarm Payrolls (12:30), US Oct Unemployment Rate (12:30), US Oct Average Hourly Earnings (12:30), US Oct F S&P Global Manufacturing PMI (13:45) and US Oct ISM Manufacturing (14:00)
** Key Events: Fed’s Logan (13:45) speaks
** Auctions: No major term auctions scheduled for Friday 1st Nov
** Earnings: 13 S&P500 companies report
All times GMT
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