CREDIT PRE-MARKET: EUR Market Wrap
- 2y/10y bunds closed +1bp/-1bp at 2.25%/2.39% - after bunds pared some early widening against a backdrop of questions around he stability of the German coalition, a slight upward revision to German PMI and a volatile pre-election UST session. US election viewing guide: https://mni.marketnews.com/4hypqR9, Fed analyst preview: https://media.marketnews.com/Fed_Prev_Nov2024_With_Analysts_d4a81c3019.pdf.
- Main/XO ended +0.6bp/+2bp at 58.9bp/314bp while €IG was -0.1bp at 1.03% (Corps flat at 0.97%, Fins -0.2bp at 1.12%, €HY +1bp at 3.22%). Energy underperformed at +0.6bp. $IG was flat at 0.83% (Corps +0.2bp at 0.82%, Fins -0.3bp at 0.84%, $HY +4bp at 2.79%).
- SXXP/SPX ended -0.3% at 509pts/5713pts. €IG's biggest risers/fallers included K+S AG (+8%), Sagax AB (+4%), Powszechna Kasa Oszczednosci B (+4%), PostNL NV (-4%).
- SX5E/SPX futures are flat. Overnight team flagged that the RBA held rates steady as expected but maintained hawkish language in the statement. The China Caixin services PMI printed comfortably above expectations, aiding China equities though spillover has been limited elsewhere.
- Later US October services ISM/PMI and September trade print, as well as UK October services/composite PMIs. The eurogroup meeting continues and the ECB’s Lagarde and Schnabel speak.
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Historical bullets
JGB TECHS: (Z4) Bullish Theme Fades
- RES 3: 149.55 - High Mar 22 (cont)
- RES 2: 147.74 - High Jan 15 and bull trigger (cont)
- RES 1: 146.53 - High Aug 6
- PRICE: 144.32 @ 16:23 BST Oct 04
- SUP 1: 143.57 - Jul 17 high
- SUP 2: 142.23 - Low Jul 02
- SUP 3: 140.21 - 1.236 proj of Mar 22 - Nov 1 ‘23 - Jan 15 price swing
The bullish outlook for JGBs was dealt a further blow Friday on the stronger-than-expected US jobs print. As a result, JGBs slipped sharply to pullback lows of 144.300 - however the low is still clear of next support at 143.57. Additionally, moving average studies on the continuation chart are in a bull-mode position, highlighting a clear uptrend. A continuation higher would open 146.53, the Aug 6 high(cont) and a bull trigger.
USDCAD TECHS: Corrective Phase
- RES 4: 1.3739 High Aug 15
- RES 3: 1.3693 High Aug 19
- RES 2: 1.3647 High Sep 19 and key resistance
- RES 1: 1.3584/91 50-day EMA / High Oct 4
- PRICE: 1.3579 @ 16:39 BST Oct 4
- SUP 1: 1.3473/3420 Low Oct 2 / Low Sep 25 and the bear trigger
- SUP 2: 1.3413 Low Feb 9
- SUP 3: 1.3358 76.4% retracement of the Dec 27 ‘23 - Aug 5 bull run
- SUP 4: 1.3288 Low Jan 5
The trend condition in USDCAD remains bearish and the latest recovery appears to be a correction - for now. The strong Sep 24 sell-off reinforced a bearish theme. The pair breached support at 1.3441, the Aug 28 low, confirming a resumption of the downtrend that started Aug 5. This paves the way for an extension towards 1.3358, a Fibonacci retracement. Resistance to watch is 1.3584, 50-day EMA - a level pierced on Friday. A break would expose 1.3647, Sep 19 high.
US TSYS: Tsys Broadly Lower, Curves Flatter After Strong September Job Gains
- Treasuries gapped lower following this morning's stronger than expected jobs data for September, futures gradually extending session lows since midmorning while curves bear flatten: 2s10s -8.542 at 5.295 -- the lowest since mid-September.
- Payrolls growth was far stronger than expected in September at 254k (cons 150k) for a 104k surprise, nearly entirely driven by the 98k surprise for private payrolls (223k vs cons 125k).
- The status flows within the household survey echo the strong headline figures that saw the unemployment rate surprisingly fall from 4.22% to 4.05%. The outright shift from employed to unemployed (-215k) extended the improvement seen in Aug (-47k) after what had been a sharp 292k increase in July that drove the surprise lurch in the unemployment rate to 4.25%.
- Markets have been swift to price out a 50bp November rate cut after September's employment report came in much stronger than expected - in addition to revisions that recast the summer's weak hiring in a much more positive light. Indeed, November implied pricing has even dipped a little below 25bp, suggesting potential for a rate hold.
- Meanwhile, focus turns to next week's CPI and PPI inflation measures on Thursday and Friday respectively, prefaced by Wednesday's September FOMC minutes release.
