EXECUTIVE SUMMARY
- MNI POLITICAL RISK- Harris And Trump Eye Final Blue Wall Blitz
- MNI US: Both Presidential Campaigns Struggle To Contain Negative News Cycles
- MNI MIDEAST: CNN-Israel At 'High Level Of Readiness' For Iran Retaliation
- MNI JAPAN: Ishiba Looks Set For Re-Election As PM Despite Loss Of Majority
- MNI US DATA: NFP Growth Would Have Been Negative With More Typical Seasonal Factor
- MNI FED: Labor Trends And Calendar Make 25bp Cuts In Nov And Dec Base Case
US
MNI US: Both Presidential Campaigns Struggle To Contain Negative News Cycles
With little to separate Kamala Harris and Donald Trump in the polls, there has been increased scrutiny over public comments made by the two presidential candidates. Particularly regarding Latino voters and women, two demographics expected to be consequential on Tuesday, and have been subject to aggressive campaign outreach in the final days of the cycle.
MNI FED: Labor Trends And Calendar Make 25bp Cuts In Nov And Dec Base Case
The final major data input ahead of the Fed's November meeting settles the question of whether the Committee will cut 25bp or opt to "skip". With the October payrolls report in hand, the Committee will almost certainly cut 25bp on Nov 7, but the data also firmly puts the base case for December's decision in favor of another 25bp cut.
- The various distortions in the October payrolls report also probably ensure that the default case is that the Fed cuts again in December barring interim surprises. In short, there will not be enough clarity in the data through end-year to suggest they should deviate from September's envisaged path.
- We get only one more payrolls report before the December 18 decision: November's comes out Dec 6. The October payrolls are so muddied that November could see a large bounceback in jobs created, and this still would not in itself give the Fed reason to skip a December cut as they consider the broader picture.
NEWS
MNI POLITICAL RISK- Harris And Trump Eye Final Blue Wall Blitz
Executive summary: Vice President Kamala Harris will speak at a pair of campaign events in Wisconsin today. Former President Donald Trump will hold rallies in Michigan and Wisconsin. He is also expected to make a stop in Dearborn, Michigan - a town with a large Arab-American population that has been at the centre of Democrat backlash to the Biden administration’s Middle East policy.
MNI MIDEAST: CNN-Israel At 'High Level Of Readiness' For Iran Retaliation
CNN reported overnight that according to a military source, Israel is at a 'high level of readiness' for an Iranian retaliation to the strikes on military targets over the weekend. Adds that the Israeli military is “still assessing the decision-making process in Iran” to determine if and when a retaliation will take place."
MNI EU-RUSSIA: Kremlin Confirms Lavrov Malta Trip In Dec, 1st To EU Since Invasion
Russian media reports that Foreign Minister Sergey Lavrov intends to travel to Malta from 5-6 Dec for the Organisation for Security and Cooperation in Europe (OSCE)'s Council of Foreign Ministers meeting. This would be Lavrov's first visit to the EU since the launching of Russia's invasion of Ukraine in Feb 2022. The Russian foreign minister is subject to EU sanctions, but unlike other senior Russian officials has not been subjected to a travel ban, with Brussels still allowing for the potential of talks to take place.
MNI JAPAN: Ishiba Looks Set For Re-Election As PM Despite Loss Of Majority
It appears increasingly likely that Shigeru Ishiba will be able to secure re-election as prime minister later in November despite his Liberal Democratic Party (LDP)-Komeito coalition losing its majority in the 27 Oct general election. A special session of the House of Representatives is expected to begin on 11 November. There, lawmakers will vote to confirm the PM. If no single candidate achieves an overall majority, the two with the most votes go to a run-off where the individual gaining the most votes becomes PM.
MNI US TSYS: Late Treasury Roundup: Ignoring Jobs Data, Yields Climb Ahead Election
- Curves maintained steeper profiles late Friday, despite Treasury futures gradually reversing this morning's post NFP-tied bid. Fast two-way trade reported as Treasury futures briefly extended lows than rebound gap higher after the latest employment report shows much lower than expected jobs gain and down revision to prior, unemployment rate in-line with expectations.
- Support evaporated after higher than expected S&P Global US Manufacturing PMI, Construction Spending and ISM prices paid data. After the bell, the Dec'24 10Y contract trades through round number support to 109-31.5 (-15.5) while curves hold steeper levels -- reflecting improved rate cut expectations on the day: 2s10s +4.592 at 15.594 (vs. 7.660 low), 5s30s +3.035 at 34.538 (vs. 28.331 low). After
- Projected rate cuts into early 2025 held firmer vs. late Thursday levels (*): Nov'24 cumulative at -24.6bp ( -23.5bp), Dec'24 -45.9bp (-42.8bp), Jan'25 -59.2bp (-58.1bp), Mar'25 -74.8bp (-75.0bp).
- Greenback initially weakened across the board after the lower-than-expected headline, but the murky details around industrial action and hurricanes likely containing the market fallout here. The USD reversed course throughout the session, terminal rates in the US stronger climbs on the week which contributed to the strong dollar reversal on Friday, with the USD index looking to close the week broadly unchanged around 104.25.
- Looking ahead, the US Presidential Election on Tuesday and the FOMC decision unusually on a Thursday are two major risk events in an otherwise light US calendar.
OVERNIGHT DATA
MNI US DATA: NFP Growth Would Have Been Negative With More Typical Seasonal Factor
- One thing of note within the report is that the surprisingly soft seasonally adjusted nonfarm payrolls growth of 12k (cons 100k) came despite the most favorable seasonal adjustment factor for an October since at least 2000.
- Our rough calculations find that if the October data had used the Oct’23 seasonal factor, seasonally adjusted payrolls growth would have actually been -46k, i.e. zero growth crudely excluding the strikes.
- However, a large health warning is needed here as we thought the same thing had happened in September re a particularly favorable factor, which we had been skeptical about.
- Instead, after latest revisions which saw NSA data actually revised up on net vs large downward revisions to the SA data (NSA revisions were +14k Aug and -10k Sep vs SA revisions -81k Aug and -31k Sep), the Sep’24 seasonal factor looks much more in keeping with recent years.
- The propensity for large revisions means it can take a couple months before we can draw more accurate conclusions here.
MNI US DATA: Not Many Signs Of Hurricane Disruption In Payrolls Report
- The household survey’s not a work due to bad weather series jumped to 512k. That’s above the 436k from Beryl in July, and is large for an October, but it’s small compared to the huge 1474k after Hurricanes Harvey and Irma in 2017.
- That aside, there don’t look to be obvious fingerprints from storm disruption in the report.
- Establishment survey: there was the expected heavy drag from manufacturing on strike activity (-46k) but the largest drag on the month came from “professional & business” (-47k). Hurricanes Harvey and Irma saw heavy impact on leisure sector but accommodation increased 3k after 10k and food & dining places increased 4k after 39k. Construction also still increased 8k after 27k.
- Average hours worked were higher than expected as they held steady at an upward revised 34.3. They hit 34.2 in July (possibly on Beryl). They were down in manufacturing (strikes) and flat in services but higher for leisure and healthcare.
- Household survey: temporary layoffs actually fell -48k in Oct. Instead, permanent layoffs increased 214k for their largest since Feb.
- On weather impacts, the BLS wrote: “It is likely that payroll employment estimates in some industries were affected by the hurricanes; however, it is not possible to quantify the net effect on the over-the-month change in national employment, hours, or earnings estimates because the establishment survey is not designed to isolate effects from extreme weather events. There was no discernible effect on the national unemployment rate from the household survey. ”
MNI US DATA: AHE Unrounded - Oct'24: A Modest Beat
AHE stronger than the median 0.3% expected but it's a smaller beat when looking unrounded
Total AHE:
- M/M (SA): 0.368% in Oct from 0.312% in Sep (initial 0.369%)
- Y/Y (SA): 3.988% in Oct from 3.881% in Sep
AHE Non-Supervisory:
- M/M (SA): 0.395% in Oct from 0.33% in Sep (initial 0.264%)
- Y/Y (SA): 4.063% in Oct from 4.044% in Sep
- Source: Bloomberg, MNI
MNI US DATA: Unemployment Rate Within Range Of Analyst Expectations
- Unemployment rate: 4.145% (cons 4.1, some skewed higher) in Oct after 4.05% in Sep
- Household employment growth: -368k in Oct after a strong 430k in Sep
- Labor force growth: -220k in Oct after a strong 150k in Sep
US DATA: Surprise Upward Revision To Mfg PMI, Highest Since July
- The S&P Global US manufacturing PMI fared better than expected in the final October PMI, revised up to 48.5 (flash 47.8) to extend an increase from 47.3 in Sept to its highest since July.
- The upward revision is in contrast to a downward revision in today’s UK final manufacturing PMI.
- “Uncertainty ahead of the Presidential Election was cited as a key reason for new orders continuing to fall, but the pace of decline eased and production was scaled back to the smallest degree in three months. Manufacturers continued to reduce employment and purchasing activity, however.”
- “Inflationary pressures softened, with input costs increasing at the slowest pace in almost a year and output price inflation also easing. Meanwhile, suppliers' delivery times lengthened for the first time in three months amid delays widely linked to hurricane-related disruption.”
- The lengthening in suppliers’ delivery times is something that was seen in yesterday’s MNI Chicago PMI.
- See the full S&P Global press release here.
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA up 288.13 points (0.69%) at 42050.46
S&P E-Mini Future up 25 points (0.44%) at 5763.5
Nasdaq up 159.1 points (0.9%) at 18253.83
US 10-Yr yield is up 9.3 bps at 4.3776%
US Dec 10-Yr futures are down 18/32 at 109-29
EURUSD down 0.0049 (-0.45%) at 1.0835
USDJPY up 0.98 (0.64%) at 153.01
WTI Crude Oil (front-month) up $0.2 (0.29%) at $69.46
Gold is down $8.65 (-0.32%) at $2735.33
European bourses closing levels:
EuroStoxx 50 up 50.12 points (1.04%) at 4877.75
FTSE 100 up 67.05 points (0.83%) at 8177.15
German DAX up 177.43 points (0.93%) at 19254.97
French CAC 40 up 58.74 points (0.8%) at 7409.11
US TREASURY FUTURES CLOSE
3M10Y +12.597, -14.445 (L: -31.459 / H: -14.445)
2Y10Y +5.179, 16.181 (L: 7.66 / H: 17.303)
2Y30Y +5.382, 35.442 (L: 25.892 / H: 37.859)
5Y30Y +2.855, 34.358 (L: 28.331 / H: 37.454)
Current futures levels:
Dec 2-Yr futures down 3.25/32 at 102-27.875 (L: 102-26.25 / H: 103-05)
Dec 5-Yr futures down 9.25/32 at 106-30.25 (L: 106-29 / H: 107-19.75)
Dec 10-Yr futures down 17.5/32 at 109-29.5 (L: 109-28.5 / H: 110-30)
Dec 30-Yr futures down 44/32 at 116-19 (L: 116-18 / H: 118-25)
Dec Ultra futures down 65/32 at 123-19 (L: 123-18 / H: 126-14)
MNI US 10YR FUTURE TECHS: (Z4) Bear Cycle Still In Play
- RES 4: 112-22 High Oct 16 and a key short-term resistance
- RES 3: 112-20 50-day EMA
- RES 2: 112-07 High Oct 21
- RES 1: 111-06+/111-24+ High Oct 25 / 20-day EMA
- PRICE: 110-15 @ 14:30 GMT Nov 1
- SUP 1: 110-00 Round number support and intraday low
- SUP 2: 109-25+ Low Jul 3
- SUP 3: 109-15 Low Jul 1
- SUP 4: 108-28+ 2.0% 10-dma envelope
A bear cycle in Treasuries remains in play and this week’s extension lower, reinforces current bearish conditions. Short-term gains are considered corrective. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. Sights are on the 110-00 handle. A break would open 109-17+, the Jul 5 low. Initial firm resistance is seen at 111.29, the 20-day EMA. Short-term gains would be considered corrective.
SOFR FUTURES CLOSE
Dec 24 +0.005 at 95.625
Mar 25 -0.030 at 95.905
Jun 25 -0.045 at 96.110
Sep 25 -0.055 at 96.225
Red Pack (Dec 25-Sep 26) -0.06 to -0.055
Green Pack (Dec 26-Sep 27) -0.055 to -0.055
Blue Pack (Dec 27-Sep 28) -0.075 to -0.06
Gold Pack (Dec 28-Sep 29) -0.08 to -0.075
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00406 to 4.65200 (-0.05530/ wk)
- 3M -0.00495 to 4.55429 (-0.05035/wk)
- 6M +0.00472 to 4.41198 (-0.01874/wk)
- 12M +0.02230 to 4.19104 (+0.03814/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.90% (+0.09), volume: $2.244T
- Broad General Collateral Rate (BGCR): 4.85% (+0.04), volume: $795B
- Tri-Party General Collateral Rate (TGCR): 4.85% (+0.04), volume: $763B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.83% (+0.00), volume: $96B
- Daily Overnight Bank Funding Rate: 4.83% (+0.00), volume: $230B
FED Reverse Repo Operation
RRP usage falls below $200B to $155.476B -- the lowest since May 6, 2021 -- vs. $201.278B on Thursday. The number of counterparties falls to 41 from 57 prior.
MNI PIPELINE: Corporate Issuance Roundup, October Total of $126.455B
No new high grade issuance Friday. The running total for October at $126.455B after pick-up in issuance this week of $36.54B total.
- Date $MM Issuer (Priced *, Launch #)
- $4.9B Priced Thursday; $36.54B/wk
- 10/31 $1.5B *Martin Marietta $750M 10Y +97, $750M 30Y +117
- 10/31 $1.25B *New Development Bank 3Y SOFR+80
- 10/31 $1B *Ford Motor Cr 7Y +183
- 10/31 $600M *Horizon Mutual Holdings 10Y +195
- 10/31 $550M *Edison Int +7Y +105
FOREX: Strong Greenback Bounce Post Weaker Payrolls, USDMXN Fresh YTD High
- Despite a far softer than expected NFP reading for October at just 12k (cons 100k) along with a heavy, and highly important, two-month downward revision of -112k, the initial punch lower for US yields and the USD reversed course throughout the session.
- Terminal rates in the US have seen stronger climbs on the week and this has contributed to the strong dollar reversal on Friday, with the USD index looking to close the week broadly unchanged around 104.25.
- USDJPY (+0.60%) displayed its usual volatility over major US data points, initially dipping around 90 pips back to session lows around 151.80, before then reversing all the way back to 153.00, where spot currently stands as we approach the close.
- EURUSD made a very brief showing above 1.0900 before also reversing back to 1.0840 at typing. The softer single currency and more stable sentiment in the UK helped EURGBP (-0.62%) ease back to 0.8385 after its impressive 2-day advance following the UK budget.
- Upward pressure on US yields and the close proximity to the US presidential election has seen a notable move higher for USDMXN into the close, rising over 1% to print a fresh year-to-date high. Investors remain wary of what another Trump term may mean for the Mexican economy, as well as pessimism surrounding the ongoing domestic reforms continuing to weigh on the peso. A clear break above the prior 20.2181 high would resume the uptrend and open 20.4578, the 1.764 projection of the Sep 18 - Oct 1 - Oct 4 price swing.
- The RBA meeting and US ISM Services PMI are notable data points on Tuesday, ahead of the US election. The FOMC decision and press conference will be on Thursday next week.
MONDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 04/11/2024 | 0700/0200 | * |  TR | Turkey CPI |
| 04/11/2024 | 0815/0915 | ** |  ES | S&P Global Manufacturing PMI (f) |
| 04/11/2024 | 0845/0945 | ** |  IT | S&P Global Manufacturing PMI (f) |
| 04/11/2024 | 0850/0950 | ** |  FR | S&P Global Manufacturing PMI (f) |
| 04/11/2024 | 0855/0955 | ** |  DE | S&P Global Manufacturing PMI (f) |
| 04/11/2024 | 0900/1000 | ** |  EU | S&P Global Manufacturing PMI (f) |
| 04/11/2024 | - | EU | ECB's Lagarde and Cipollone in Eurogroup meeting | |
| 04/11/2024 | 1330/1430 | EU | ECB's Elderson speech at '10 years of SSM' conference | |
| 04/11/2024 | 1400/1500 | EU | ECB's Elderson in panel 'Achievement...and the outlook' | |
| 04/11/2024 | 1500/1000 | ** |  US | Factory New Orders |
| 04/11/2024 | 1530/1030 |  CA | BOC market participants survey | |
| 04/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 04/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 04/11/2024 | 1800/1300 | *** | US | US Note 03 Year Treasury Auction Result |
| 05/11/2024 | 0330/1430 | *** |  AU | RBA Rate Decision |