CREDIT OPEN: Primary to take backseat amid ECB
European stocks futures are significantly higher ahead of the cash open this morning, to follow some bumper tech-led gains on Wall Street and in turn Asia overnight.
That after US inflation painted something of a mixed picture on Wednesday and was sufficient to pare back expectations that the Fed could go for a larger 50bp rate cut next week.
Headline CPI rose by 0.2% MoM in Aug and 2.5% YoY, both in line with expectations, although a 0.3% MoM rise of Core CPI slightly exceeded the 0.2% increase anticipated.
Odds of a 50bp rate cut at next week’s meeting subsequently fell to around 15%, although markets continue to discount 110bp of cuts before year-end which was broadly unchanged versus before the data.
In the wake of the data, Wall Street stocks turned around some sharp earlier losses to end significantly higher, with the Nasdaq and S&P500 closing up by 2.17% and 1.07% respectively.
That positivity filtered into Asia with the Nikkei (+3.1% at time or writing) leading regional gains on the day.
Whilst the Fed is set to cut next week, the focus today is on the ECB which is also set to cut by 25bps at this afternoon’s verdict which is followed by the usual Lagarde presser.
In brief, the latest data on wage growth, the overall disinflation trend, as well as the weaker-than-expected GDP numbers all largely support the case for a rate cut by the ECB.
Ahead of the ECB there is nothing in the way of market moving data due, with focus instead to be on govvie supply where Ireland, UK and Italy are all conducting auctions this morning ahead of the US this afternoon.
For more on latest developments see the European Breakfast Briefing.
Wednesday's supply prospects
ECB days are never seen as ideal to launch a new bond offering and that goes to explain the rather sparse public pipeline (just two German SSAs present) going into Thursday. Even if nothing pops up then we have already beaten the average euro supply estimate of EUR34bn, with the haul at EUR40.675bn as of Wednesday’s close. That after EUR5.25bn crossed the tape yesterday, including EUR1.55bn from a quartet of high-yield corporates, with the sector joining the recent issuance flurry having been largely conspicuous by their absence before that.
** Gemeinsame NRW Kommunen EUR 9yr sub-benchmark bond (Staedteanleihe No. 8)
** Munich EUR250m debut green
Wednesday’s lone US high-grade offering brought ex-SSA issuance for the week to USD23.225bn, a bit below the lowest weekly estimate of USD25bn, and allowed the primary market to avoid its seventeenth “zero” day of the year. Our US team are expecting at least a half a dozen borrowers to forge ahead with their financing plans today, including Hewlett-Packard who wrapped up investor calls yesterday. For more colour see THE ENDGAME.
What to watch Thursday – ECB verdict
** Key Data: SP Aug F CPI (08:00), US Aug PPI Final Demand (13:30) and US Initial/Continuing Jobless Claims (13:30)
** Key Events: ECB Rate Decision (13:15) and President Lagarde Holds Presser (13:45)
** Auctions: IR to sell EUR1bn 2031 & 2034 Bonds (10:00), UK to sell GBP2bn 2026 Gilts via tender (10:00), IT to sell up to EUR6.5bn 2027 & 2031 BTPs (10:00) and US to sell USD22bn 30yr Bonds (18:00)
All times BST
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