CREDIT OPEN: Window closing
EU stocks are seen opening modestly higher this morning, bringing some hope that cooler heads may prevail following yesterday’s losses and even more notable dump in rates seen as markets fretted over escalating Middle East tensions and EU data confirmed a steep moderation in inflation.
Those escalation risks remain firmly in mind though where Israel PM Netanyahu vowed retaliation after yesterday’s firing of a barrage of ballistic missiles at Israel, although Iran said its actions against were concluded unless Israel instigates further retaliation.
Over in Asia, Hang Seng remained in a bubble, posting a gain of up to 7.3%, taking its cumulative gain in just the last six sessions to as much as 24.3%. However, one has to question the degree to which that type of move makes the market any more investible on a longer-term basis.
Ahead of that S&P500 (-0.93%) and Nasdaq (-1.53%) succumbed to yesterday’s Middle East developments which also put a bid into oil. US index futures are currently in the red too with Nike down sharply in extended trade having withdrawn full-year guidance and warning on weak holiday spending.
In terms of the day ahead, this morning’s EU data is unlikely to be market moving while later comes ADP Employment as the second of this week’s curtain raisers for Friday’s NFPs and comes after Aug JOLTS survey showed a surprise rise in job openings.
There’s also a heavy slate of ECB and Fed speakers on tap.
Otherwise, the rates complex deserves close monitoring after French debt led yesterday's bull-flattening move, pulling selective 10yr yields down to fresh YTD lows. ECB rate cut bets continued to build following data showing that euro area annual inflation fell to 1.8% in Sep (markets are currently ascribing a 91% probability to a 25bps cut in Oct via BBG data), sharply up from ~25% at the start of last week.
UK and Germany conduct sales which could face some resistance given the concession sucking drop seen in yields on Tuesday.
For more on latest developments see the European Breakfast Briefing.
Wednesday’s supply prospects
The week’s issuance window is shrinking fast ahead of Thursday’s German holiday and Friday’s US payroll data, meaning today is likely to be the last day we will see any meaningful activity this week. A handful of euro deals are already in the pipeline, along with potential sterling and dollar trades, but we look unlikely to see a glut of issuance. With that, the weekly single currency (excluding HY corps) stands at just EUR4.45bn, meaning we look set to fall short of the EUR22.5bn estimate given in our latest weekly issuance poll.
** EIB EUR 5yr EARN
** MuniFin USD1bn no grow 5yr green at SOFR m/s +50 area IPTs
** CPPIB Capital USD 3yr at SOFR m/s +47 area IPTs
** Gemeinsame NRW Kommunen EUR 9yr sub-benchmark bond (Staedteanleihe No. 8)
** BayernLB inaugural EUR500m no grow 7yr senior preferred
** Tatra banka EUR500m no grow 4yr covered
** Oberosterreichische Landesbank EUR250m no grow Sep 2030 covered
** Hammerson GBP 12yr
** Belron EUR850m 5NC2 secured at 5.75-6% talk
** IHO min EUR400m 5NC2 & EUR400m 7NC3 secured SLBs
** INEOS EUR600m 5.5NC2 secured at 6.75-7% IPTs
** Flora Food EUR100m Jul 2029 secured tap at 98.5-99 IPTs
** EVRi GBP500m 7NC3 secured
Stateside, five ex-SSA borrowers converged on the market Tuesday to raise USD9bn and kick off the month. This while the rest of the market occupied itself elsewhere with the walkout by more than 50k longshoremen that has all but closed down ports from New England to Texas, and Iran’s missile attack on Israel, not to mention a handful of economic data releases. For more colour see THE ENDGAME.
What to watch today
** Key Data: SP Sep Unemployment Change (08:00), IT Aug Unemployment Rate (09:00), EC Aug Unemployment Rate (10:00) and US Sep ADP Employment Change (13:15)
** Key Events: ECB’s Guindos (08:15 & 08:30), Kazaks (10:30 & 10:45), Lane (10:30), Simkus (10:45), Elderson (12:00) & Schnabel (17:45) all speak, along with Fed’s Hammack (14:00), Musalem (15:05), Bowman (16:00) & Barkin (17:15)
** Auctions: UK to sell GBP4bn 2029 Gilts (10:00) and GE to sell EUR4.5bn 2034 Bunds (10:30)
** Holidays: Chinese Golden Week
All times BST
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