CREDIT OPEN: Primary prospects limited as German players take a break
EU stocks look set to start the Unity Day session firmly in the red following a mixed overnight handover with markets in the grip of continued geopolitical uncertainty while also falling further into the shadow of Friday's US jobs data.
Over in Asia, Hang Seng reversed fleeting opening gains and is on course to close lower having surged by a stunning 23.1% in the prior six sessions. In contrast, the Nikkei was boosted by a weaker JPY after PM Ishiba took markets by surprise and said the country was not ready for higher rates, sparking renewed interest into JPY carry trades.
Elsewhere, oil remains well underpinned with Brent currently at USD74.85 having hit a fresh multi-week high of 76.14 on Wednesday.
US index futures are also in the red after Tesla Q3 deliveries missed expectations and after cash markets closed virtually flat, set against a backdrop of rising Middle East tensions. US employment data surprised to the upside for a second day with the latter slightly denting Fed rate cut hopes.
Expectations surrounding what the ECB will do at its meeting on 17th October remain steady though where markets are currently ascribing a 94% probability (OIS data via BBG) to a 25bps cut.
In terms of the day ahead, the spotlight is on the swathe of services PMI releases from Germany, France, Italy, Spain, and the Eurozone.
Turning to NY hours, the Sep ISM Services Index is widely expected to show the services sector maintaining a similar pace of expansion to that seen in Aug. The usual round of weekly initial jobless claims figures are also due.
Hefty auction supply is on tap from Spain and France worth up to EUR17.75bn which could be easier to digest given the rise in yields seen Wednesday.
Speakers comprise Fed’s Schmid and Kashkari.
For more on latest developments see the European Breakfast Briefing.
Thursday’s supply prospects
The German holiday is set to largely shutter the market today and we expect little in the way of meaningful euro supply. Dollar (FMO 5yr green) and sterling (CIBC 5yr covered) deals are already in the pipeline though and expected to price today. Should nothing pop up in euros today or tomorrow, the overall weekly total would finish at EUR14.655bn, with HY names accounting for EUR4.705bn of that after the sectors busiest day of the year on Wednesday.
** FMO USD500m no grow 5yr green at SOFR m/s +47 area IPTs
** CIBC GBP 5yr SONIA-linked covered
Stateside, the primary market looks on course to undershoot expectations for the week where the ex-SSA haul currently stands at USD12.85bn, a little more than half of what the Street was anticipating (USD22bn) for the entire week. For more colour, see THE ENDGAME.
What to watch today – Composite/Services PMIs
** Key Data: SP Sep HCOB Composite/Services PMIs (08:15) , IT Sep HCOB Composite/Services PMIs (08:45), FR Sep F HCOB Composite/Services PMIs (08:50), GE Sep F HCOB Composite/Services PMIs (08:55), EC Sep F HCOB Composite/Services PMIs (09:00), US Weekly Initial/Continuing Jobless Claims (13:30), US Sep F S&P Global Composite/Services PMIs (14:45), US Aug Factory Orders (15:00), US Aug F Durable Goods Orders (15:00) and US Sep ISM Services Index (15:00)
** Key Events: Fed’s Schmid (15:00) & Kashkari (15:40) speak
** Auctions: SP to sell EUR4.25-5.75bn 2027, 2029, 2039 & 2041 bonds (09:30) and FR to sell EUR10-12bn 2034, 2049 & 2055 OATs (09:50)
** Holidays: Chinese Golden Week
All times BST
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