CREDIT OPEN: Pre-payroll paralysis to grip markets
If ever there was cause to expect markets to spend a morning treading water, then today looks like the day given the fever pitch anticipation associated with the latest US employment report.
According to the BBG consensus, NFPs are expected to improve to 165k in Aug from the unexpectedly weak 114k print last time. However, the whisper number is likely to be lower after the weaker ADP Employment report and over 3yr low print on JOLTs.
At present, that all leaves markets going into today’s number ascribing a 43%/57% probability in favour of a more conservative 25bps cut by the Fed at its next meeting (CME data).
What happens to stocks if we get a weak enough payroll print to tip the scales in favour of a bolder 50bps move? That’s a hard one to answer and will depend on the magnitude of any downside miss with a small undershoot likely to be seized on by the team Goldilocks while a big miss could easily spook markets that are ultra-sensitive to what is deemed bad news if the cliff diving seen following last month’s big NFP miss is any guide.
Ahead of today’s data, US stocks closed mixed with S&P500 (-0.30%) seeing a third straight loss while Nasdaq (+0.25%) benefitted from some rotation back into tech although index futures have subsequently moved into the red amid a mixed session for Asian stocks.
Elsewhere to note, Brent is hovering just above 9m lows hit on Wednesday at USD72.35 (today’s low USD72.63).
Before we get to the US data, France reports Jul Industrial/Manufacturing Production data and the eurozone reports final Q2 GDP.
Already out, German Jul Industrial Production was awful at -2.4% MoM (exp -0.5%) vs a previously revised 1.7% rise in June. Exports & imports both surprised to the upside though at 1.7% & 5.4% (exp 1.1% & 0.7%) following revised prints at -3.3% & 0.4%.
For more on latest developments see the European Breakfast Briefing.
Friday’s supply prospects
Thursday’s EUR8.15bn/GBP2.8bn rush has all but emptied the public pipeline but we could see some more opportunistic activity on Friday. Ahead of today’s session, the weekly single currency haul stands at EUR36.57bn and within striking distance of the EUR38.5bn average weekly estimate given by participants in our issuance poll. Non-covered FIG issuers have led from the front so far this week with EUR12.12bn of the volume and 20 of the overall 56 tranches to have priced.
** Munich EUR250m debut green
** Macquarie Bank EUR short-to-intermediate green snr
The respondents to our weekly US issuance poll were looking for an average USD52bn to cross the tape this week. Well, in just three trading sessions, 59 – no that’s not a misprint – ex-SSA issuers combined to raise a staggering USD80.575bn. With the addition of nine SSA issuers (USD17.3bn), overall issuance for the week stands at USD97.875bn, making it by far the busiest week of the year and the fourth busiest overall issuance week on record. For more colour see THE ENDGAME.
What to watch today
** Key Data: FR Jul Industrial/Manufacturing Production (07:45), EC Q2 F GDP (10:00), US Aug Change in Nonfarm Payrolls (13:30), US Aug Unemployment Rate (13:30) and US Aug Average Hourly Earnings (13:30)
** Key Events: Fed’s Williams (13:45) and Waller (16:00) speak
** Auctions: BE to sell bonds through Ori auction (11:00)
** Earnings: 3 Stoxx600 companies report
All times BST
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