CREDIT OPEN: Supply to slow as markets fall into shadow of the Fed
A relatively calm start to Fed week looks to be in store on Monday where EU index futures are modestly in the green, suggesting that European stocks will add to Friday’s gains in early trade.
Ahead of Wednesday’s FOMC verdict, markets are currently titled toward expecting a 50bps cut having ramped up bets for a bolder move during the final two sessions of last week.
Against that backdrop, both S&P (+0.54%) and Nasdaq (+0.76%) closed out the week with further gains, making for hefty respective 5-day win streaks worth 4.02% & 5.95%.
Whether the winning run on Wall Street can stretch to a sixth straight session currently hangs in the balance though where US index futures are narrowly mixed ahead of today’s cash open.
There’s not much in terms of scheduled events or data to move the needle today which could add to the sense that markets are entering a wait-and-see phase ahead of Wednesday’s Fed verdict.
Italian Aug final CPI, Eurozone Jul trade balance and the Empire State Sep Manufacturing Survey will not be market moving.
A trio of ECB speakers are headlined by chief eco Lane while rates markets get a break from auction supply.
Over the weekend, weaker than expected China data got plenty of attention where industrial production, retail sales and fixed asset investment for Aug all undershot expectations, adding to calls for stimulus from the PBoC.
Chinese Aug Industrial Production softened to 4.5% YoY from 5.1% & missed the 4.7% forecast, Retail Sales softened to 2.1% YoY from 2.7% vs 2.5% expected while FAI slowed to 3.4% from 3.6%.
Along with Japan, mainland China markets are closed today while Hang Seng is set to end relatively flat with property stocks and tech among the weakest performers.
For more on latest developments see the European Breakfast Briefing.
Monday’s supply prospects
The September frenzy is expected to lose some steam this week as our poll participants submitted an average combined estimate of EUR24bn to come (range EUR14bn to EUR31bn), with corps expecting to lead the pack. That after EUR41.075bn crossed the tape last week, with IG corporates dominating in terms of the number of tranches with 16 of the 38 lines to price. However, it was the SSA sector that boosted volumes with EUR22.75bn, mainly thanks to huge trades from the European Union and Italy on Tuesday which raised EUR18bn between them.
** Gemeinsame NRW Kommunen EUR 9yr sub-benchmark bond (Staedteanleihe No. 8)
** Munich EUR250m debut green
Stateside, on average, the Street is looking for only USD24bn to cross the tape in the US this week, while more than one thought we could see as little as USD15bn price. On the other hand, the most optimistic of the bunch thought we could see as much as USD30bn come to market. See the IG WEEKLY WRAP UP.
What to watch today (and for the week)
** Key Data: IT Aug F CPI (09:00), EC Jul Trade Balance (10:00) and US Sep Empire Manufacturing (13:30)
** Key Events: ECB’s Panetta (08:00), Guindos (09:10), Lane (13:00)
** Auctions: No major term auctions scheduled for Monday 16th Sep
** Viewpoint - The week ahead:
- FOMC should cut 25bp (Tuesday-Wednesday). SEP and Powell presser accompany
- BoE steady at 5% with QT details. Norges Bank on hold at 4.5% (both Thursday). BoJ on hold (Friday)
- China MLF (TBC)/Prime rates (Fri)
- UK August CPI (Wednesday), retail sales/public finances (Friday)
- Canada August CPI & housing starts (Tuesday). Final July/flash August retail sales (Friday)
- Australia August labour market report (Tuesday)
All times BST
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