CREDIT OPEN: Tone improves but primary pickings expected to be slim
Battered EU stock bulls look set for some relief at Monday's open where futures point higher to follow five straight losses for key cash indices which saw a cumulative 4.28% and 2.68% wiped off the Stoxx50 and Stoxx600 with the latest losses on Friday coming courtesy of the global IT outage which caused chaos in travel and related sectors.
One crumb of comfort from a chart perspective was that both indices respected key lows registered in June and July, offering some hope that a more material correction can be avoided.
During Asian hours, Hang Seng has been enjoying a tech led rebound although mainland China stocks are lower despite a 10bps reduction in China's 7-day Reverse Repo rate and one-year & five-year Loan Prime Rates to 1.7%, 3.35% & 3.85% respectively as China looks to shore up its economy.
USTs and US index futures appear generally unfazed by President Biden's decision to drop out of the election race which follows last week's ongoing rotation out of big tech into small cap stocks as markets reposition in the wake of recent signs that inflation is easing.
Today delivers little to move the needle where data is second tier, leaving thoughts on key data due later in the week, notably the June US PCE report on Friday.
Earnings are a big focus this week where a total of 154 Stoxx600 and 136 S&P500 members report in what are likely to be increasingly thinner markets as seasonals factors drain liquidity, a dynamic which also has the potential to magnify price swings in markets that are already subject to heightened volatility.
The are no speakers scheduled for Monday while Fed officials entered blackout on Saturday on approach to the next FOMC verdict due a week on Wednesday.
Auction supply comes from Belgium via 2034 & 2055 OLOs sales while rates players will be watching Gilts which underperformed Friday as higher than expected public borrowing data stoked supply concerns.
For more on latest developments see the European Breakfast Briefing.
Monday's supply prospects
It is likely to be a slow week for the European primary bond market this week as the summer lull takes a stronger grip, which coincides with an uptick in corporate earnings. At the time of writing there were no confirmed deals for this week's business, which comes after Friday's blank left the weekly single currency haul last week at EUR16.15bn and less than half the previous week's final EUR33.87bn total (more here).
Activity in the US high grade primary market last week belonged to the banking industry, as four of the six "big six" banks followed Q2 earnings results with some hefty financing, while regional banks got into the act after the dust had cleared. Of the USD48.1bn raised, the seventh busiest ex-SSA issuance week of the year, USD36.85bn (77%) came from domestic FIGs - USD24.5bn of that from JPMorgan, Morgan Stanley, Goldman Sachs and Wells Fargo. For more details see the IG WEEKLY WRAP UP.
What to watch today (and for the week)
** Key Data: US Chicago Fed Nat Activity Index (13:30)
** Key Events: No key events scheduled for 22nd July
** Government Auctions: Belgium to sell EUR2-2.5bn 2034 and 2055 OLOs (11:00)
** Earnings: 6 Stoxx600 and 9 S&P500 companies release results
- BoC set for back-to-back cuts (Wednesday)? Fed/BoE pre-meeting quiet periods
- US Q2 advance GDP (Thursday). June PCE report (Friday)
- Japan July prelim PMIs (Wednesday) June services PPI (Thursday), July Tokyo CPI (Friday)
- EMU/German/French July prelim PMIs (Wed). July German Ifo/French business confidence (Thu)
- Spain June PPI (Wednesday). EMU June money supply (Thursday). ECB CES (Friday)
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