CREDIT OPEN: Risk bears stay in the driving seat
EU stocks are eyeing further losses this morning and face a nervous run into the weekend as US recession fears continue to lurk after yesterday’s weak ISM manufacturing data and jump in jobless claims.
Those worries saw S&P500 (-1.37%) and Nasdaq (-2.3%) close sharply lower on Thursday while also sending US yields lower for a sixth consecutive day in a move that took the 10yr US yield below 4%.
US yields have continued to fall overnight, as have US index futures, as badly received updates from Intel and Amazon feed into generalised slowdown worries and concerns that the Fed may be behind the curve. With that, easing bets continue to firm with more than 100bps of Fed cuts now priced by year-end.
Following the weak US handover, Asian equity indices are a sea of red today with Nikkei dumping by up to 5.8%, as ongoing JPY strength weighs on exporters. That also puts the index well into correction territory, having now fallen as much as 15% from its 11th July peak.
The main data event today is, of course, the latest US employment report where a downside miss on NFPs could amplify bearish sentiment in markets that are clearly of a mind to take bad news at face value if the reaction to yesterday’s ISM and jobless claims updates is any guide. The BBG consensus calls for NFPs to slow to 175k in Jul from a prior 206k.
Ahead of payrolls, this morning’s data will provide hard data on how factory activity ended Q2 in France and Italy where industrial production updates are due for June.
Corporate news will still matter but it’s a slower day where 11 Stoxx600 & 7 S&P500 companies are updating investors.
Speakers comprise BoE chief eco Pill and Fed’s Goolsbee.
For credit players, it will be worth watching synthetic credit indices this morning after the cost of default protection rose sharply on Thursday with iTraxx Crossover jumping 15.6 points.
For more on latest developments see the European Breakfast Briefing.
Friday’s supply prospects
Summer Friday’s rarely throw up any new bond issuance and we expect today to be no different given the empty pipeline and volatility being seen in adjacent markets. Ahead of the session, the weekly single currency haul stands at EUR7.82bn, and whilst not a huge number is more than many expected to price given the distractions elsewhere this week.
Seven ex-SSA borrowers tapped the US public debt market Thursday, kicking off the month of August by raising USD8.825bn. That also brought ex-SSA issuance for the week to USD31.125bn, enough to top the average weekly estimate (USD27bn) for the twenty-fourth time this year. For more colour, see THE ENDGAME.
What to watch today
** Key Data: FR Jun Industrial Production (07:45), IT Jun Industrial Production (09:00), US Jul Change in Nonfarm Payrolls (13:30), US Jul Unemployment Rate (13:30), US Jul Average Hourly Earnings (13:30), US Jun Factory Orders (15:00) and US Jun F Durable Goods Orders (15:00)
** Key Events: BoE’s Pill (12:15), Fed’s Barkin speaks (17:00)
** Auctions: BE to sell bonds through Ori auction (11:00)
** Earnings: 11 Stoxx600 & 7 S&P500 companies report
All times BST
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