DAILY CLOSE: Markets to reassess after stronger ISM

** Losses in the European equity complex were small relative to the seismic shifts seen across Asian bourses overnight (especially Nikkei) but the overall tone was still decidedly sour. We expected very little to surface in the new issue market this week and the dire prevailing backdrop could already be enough to start putting nails into the coffin for any would-be issuers looking to steal a march on the anticipated uptick in issuance that is usually associated with the latter part of August. USTs and Bunds saw significant moves with the front end of the US curve rallying so much (around 20bp) at one point that 2/10s dis-inverted (albeit briefly) for the first time since 5th July 2022

** SSA issuance remains predictably elusive with the last recorded EUR deal now a whopping 12 days ago (Land Schleswig Holstein) and having not seen a deal in any major currency since the Inter-American Development Bank placed a USD1bn 5yr FRN on 25th July. It seems unlikely that any issuer will be brave (or silly) enough to move into the current conditions especially with EGB yields swinging wildly albeit with a heavy skew to the downside. Some semblance of 'normality' will need to return to the broader marketplace and only then would we expect a larger, more frequent issuer to take the reins and in effect reopen the market

IGM Monthly Reports

** European SF: July 2024 Supply in Review - July closed with around EUR14.5bn of bonds placed with investors, which was up around 25% on June. Among that total, CLOs and RMBS led the way. CLOs accounted for 22 deals, and 12 of those were new issues (the rest being nine resets and one refi). July's tally of EUR5.2bn took the YTD new issue CLO total to EUR30bn. RMBS sales of around EUR4bn helped the YTD total to nearly EUR35bn and more than double the volume seen at the same stage in 2023. The auto market was more subdued, with just two deals printing

Tuesday's primary prospects

As things stand the public pipeline is empty.

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Monday's broader market developments

** The global risk rout continued as US slowdown fears fired a dash for safety and easing bets ramped up. Heavy stock losses in Europe and US followed a brutal session for Nikkei (-12.4%) amid further JPY strength & risk unwinds. EU/US yields sank but came off lows after US ISM Services rose by more than expected. Brent hit its lowest level since January on growth worries while iTraxx Crossover jumped by as much as 29pts to a fresh YTD high, making for a 3-day rise of up to 66pts

** Stoxx600 -3.62% at worst, losses led by Real Estate and Energy. Index broke beneath a key Feb low at 481.29 (Mon’s session low 479.83), leaving bears focussed on the YTD/Jan low at 464.99

** Govvies: 10yr GER yield fell by up to 9.6bps making for a 8-session/36.6bps drop., but at one point was higher on the day. 2yr GER to up to 20bps lower to 17-m low at 2.15% before reversing the bulk of the earlier move

** Data:

• CH Jul Caixin Services PMI beat at 52.1 (exp 51.5, prev 51.2)
• SP Jun Industrial Production MoM beat at 0.3% (exp 0.0%, prev -0.1%)
• EC Jul F HCOB Services PMI matched flash at 51.9
• EC Aug Sentix Investor Confidence missed at -13.9 (exp -8.0, prev -7.3)
• UK Jul F S&P Global Services PMI revised up to 52.5 (flash 52.4)
• EC Jun PPI YoY above f/c at -3.2% (exp -3.3%, prev -4.2%)
• US Jul ISM Services Index beat at 51.4 (exp 51.0, exp 48.8)

What to watch Tuesday - EC retail and US Trade data take the stage, heavy earnings slate in the US

** Key Data: UK Jul BRC Sales (00:01), JN Jun Household Spending (00:30), GE Jun Factory Orders (07:00), GE Jul HCOB Germany Construction PMI (08:30), UK Jul S&P Global UK Construction PMI (09:30), EC Jun Retail Sales (10:00), IT Jun Trade Balance (10:00), US Jun Trade Balance (13:30)

** Key Events: BOE releases report on APF (12:00)

** Government Auctions: Japan to sell JPY2,600bn 10yr Bonds (04:35), Austria to sell up to EUR1.44bn 2034 and 2040 bonds (10:00), UK to sell GBP2bn 2043 bonds (10:00), Germany to sell EUR4bn bonds (10:30), US to sell USD58bn 3yr notes (18:00)

** Earnings: 13 Stoxx600 and 37 S&P500 companies release results

All times BST

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