EXECUTIVE SUMMARY
- MNI US Election Preview
- MNI: US Payrolls Preview: Storms and Strike Uncertainty
- MNI US DATA: Initial Claims Surprise Lower As Hurricane Hit States Mostly Normalize
- MNI Chicago Business Barometer™ - Dropped to 41.6 in October
US
MNI: US Payrolls Preview: Storms and Strike Uncertainty
Nonfarm payrolls growth is expected to slow materially to circa 100k in October after a booming 254k in September, with significant disruption from strikes and potential hurricane fallout. The Fed’s Waller has previously estimated this could drag 100k from payrolls this month although that appears right at the top end of analyst expectations.
NEWS
MNI US Election Preview
Please find attached an updated copy of the US Election Preview published by MNI's Political Risk Team on October 30. The content is unchanged but some minor formatting issues have been resolved. Full PDF article: 2024 US Election Preview
MNI UK FISCAL: No. 10 Spox Refuses To Comment On Market Moves Post-Budget
PM Sir Keir Starmer's spox, asked by reporters on the market reaction to the Budget, says "We don't comment on market movements." Says the Budget "has been about restoring fiscal stability [...] there are two new robust fiscal rules". Spox: "Tough choices were necessary to fix the foundations of the UK economy". For more see 'GBP: Aggressive Pick-Up in Volumes Pressures GBP to Multi-Month Lows', 1410GMT', and 'GILTS: Yield Jump Notable Not Exceptional, Could Be Sticky Given Drivers', 1548GMT.
MNI EU: Parliament To Vote On New Commission 27 November
The publication of the draft agenda for the European Parliament's 25-28 Nov plenary session in Strasbourg has confirmed that MEPs will vote on the new College of Commissioners on Wednesday 27 November. If the vote is successful this means Commission President Ursula von der Leyen's second term will begin on 1 December.
MNI RUSSIA: Lavrov To Meet w/China Rep Amid Backlash At NK Troops In Ukraine
Foreign Minister Sergey Lavrov has been speaking at a meeting of the Minsk International Conference on Eurasian Security taking place presently in the Belarusian capital (the event is billed as a Eurasian counter to the Munich Security Conference).
MNI US TSYS: Bonds Lead Bounce in Second Half Trade, Pre-NFP Squaring
- Treasury futures are quietly pared losses in the second half, curves mildly flatter (2s10s -.344 at 11.028; 5s30s -2.334 at 31.670) with bonds leading the move. In the absence of headline drivers, the late drift off lows mirrored late moves in Gilts.
- The Dec'24 10Y futures contract trades currently -7 at 110-15.5 vs. 110-04 low, initial technical resistance above at 111-06.5 (Oct 25 high) to 111-29 (20-day EMA).
- Trading desks note modest short covering from proprietary/trading accts looking to square up positions ahead of tomorrow's October employment report at 0830ET, current survey estimate at +105k jobs vs. +254k in September.
- The FOMC announces their next rate decision on Thursday, November 7 (dots not included. Current projected rate cuts into early 2025 are largely steady vs. late Wednesday levels (*): Nov'24 cumulative at -23.5bp ( -23.5bp), Dec'24 -42.8bp (-42.8bp), Jan'25 -58.1bp (-58.1bp), Mar'25 -75.0bp (-76.0bp).
OVERNIGHT DATA
MNI Chicago Business Barometer™ - Dropped to 41.6 in October
The Chicago Business Barometer™, produced with MNI, dropped 5.0 points to 41.6 in October after edging up for two consecutive months, making the barometer the lowest since May 2024, and 1.6 points below the year-to-date average.
MNI US DATA: Initial Claims Surprise Lower As Hurricane Hit States Mostly Normalize
Initial jobless claims surprised lower with 216k (sa, cons 230k) in the week to Oct 26 after a marginally upward revised 228k (initial 227k).
- The six states most impacted by Hurricanes Helene and Milton saw a more notable decline in claims, to 24.5k from 32.3 the week prior and a post-Helene high of 36.1k. It leaves them much closer to typical levels seen at this time of year.
- Within those, North Carolina (-3.0k) and Florida (-2.7k) were a large driving force behind national claims falling -3.3k in the NSA data.
MNI US DATA: GDPNow Points To Real GDP Growth Overshooting FOMC Forecast
It’s obviously very early days for tracking but the initial estimate from the Atlanta Fed puts Q4 real GDP growth at 2.66% annualized, fresh from accurately predicting the 2.8% in yesterday’s Q3 advance.
- If that materializes it would see real GDP growth of 2.5% Y/Y in Q4, implying a notable overshoot of the Fed’s forecast from the September SEP.
- The median dot looked for 2.0% Y/Y for Q4 in a seemingly closely held view with a central tendency range of 1.9-2.1% (excludes three highest and lowest estimates). In fact, it would be right at the top of the 1.8-2.6% range of all FOMC members.
- The FOMC of course won’t be updating forecasts at next week’s meeting - the next SEP will be in December - but it gives an indication of how the growth outlook has surprised positively over the past six weeks.
MNI US DATA: Challenger Job Cuts At Higher End Of Recent Octobers
Whereas Challenger hiring announcements were healthy in October (potentially from Amazon hiring coming a month later than last year), job cut announcements offered a similar overview to last month.
- Cut announcements fell to 55.6k in Oct from 73k but it meant a similar pace of 51% Y/Y after the 53% Y/Y in September, for fastest increases since Sep 2023.
- Tech cuts played a sizeable role in the monthly decline in the NSA data, as they shrank to 3.6k from 11.4k. Indeed, ex-tech layoffs climbed 71% Y/Y, also the fastest increase since Sep 2023.
- With overall cut announcements at the high end of Octobers from recent years (see left chart below), labor market conditions continue to slow but at a still manageable pace.
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 196.53 points (-0.47%) at 41944.92
S&P E-Mini Future down 85 points (-1.45%) at 5766.5
Nasdaq down 422.9 points (-2.3%) at 18184.09
US 10-Yr yield is down 2.2 bps at 4.2783%
US Dec 10-Yr futures are down 7/32 at 110-15.5
EURUSD up 0.0014 (0.13%) at 1.087
USDJPY down 1.3 (-0.85%) at 152.13
WTI Crude Oil (front-month) up $2 (2.92%) at $70.61
Gold is down $38.3 (-1.37%) at $2749.27
European bourses closing levels:
EuroStoxx 50 down 58.12 points (-1.19%) at 4827.63
FTSE 100 down 49.53 points (-0.61%) at 8110.1
German DAX down 179.8 points (-0.93%) at 19077.54
French CAC 40 down 77.99 points (-1.05%) at 7350.37
US TREASURY FUTURES CLOSE
3M10Y +0.506, -27.586 (L: -34.256 / H: -23.677)
2Y10Y -0.149, 11.223 (L: 8.133 / H: 13.037)
2Y30Y -1.587, 30.296 (L: 26.032 / H: 33.046)
5Y30Y -2.39, 31.614 (L: 28.321 / H: 34.143)
Current futures levels:
Dec 2-Yr futures down 1/32 at 102-31.25 (L: 102-28 / H: 103-00.25)
Dec 5-Yr futures down 4.25/32 at 107-7.75 (L: 107-00 / H: 107-10.5)
Dec 10-Yr futures down 6.5/32 at 110-16 (L: 110-04.5 / H: 110-20)
Dec 30-Yr futures steady at at 118-2 (L: 117-06 / H: 118-07)
Dec Ultra futures up 4/32 at 125-22 (L: 124-24 / H: 126-03)
MNI US 10YR FUTURE TECHS: (Z4) Bear Cycle Remains In Play
- RES 4: 112-22+ 50-day EMA
- RES 3: 112-22 High Oct 16 and a key short-term resistance
- RES 2: 112-07 High Oct 21
- RES 1: 111-06+/111-29 High Oct 25 / 20-day EMA
- PRICE: 110-16 @ 1522 ET Oct 31
- SUP 1: 110-04+ Low Oct 31
- SUP 2: 110-00 Round number support
- SUP 3: 109-17+ Low Jul 5 (cont)
- SUP 4: 109-01+ 2.0% 10-dma envelope
A bear cycle in Treasuries remains in play and the contract is trading just above this week’s lows. Short-term gains are considered corrective. This week’s move down reinforces the bear theme and maintains the bearish price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too. Sights are on the 110-00 handle. Initial firm resistance is seen at 111.29, the 20-day EMA.
SOFR FUTURES CLOSE
Dec 24 steady at 95.620
Mar 25 -0.015 at 95.935
Jun 25 -0.020 at 96.155
Sep 25 -0.020 at 96.275
Red Pack (Dec 25-Sep 26) -0.02 to -0.015
Green Pack (Dec 26-Sep 27) -0.025 to -0.02
Blue Pack (Dec 27-Sep 28) -0.025 to -0.02
Gold Pack (Dec 28-Sep 29) -0.02 to -0.01
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.01565 to 4.65606 (-0.05124/ wk)
- 3M -0.01182 to 4.55924 (-0.04540/wk)
- 6M -0.01074 to 4.40726 (-0.02346/wk)
- 12M -0.00560 to 4.16874 (+0.01584/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.81% (-0.01), volume: $2.045T
- Broad General Collateral Rate (BGCR): 4.81% (+0.00), volume: $798B
- Tri-Party General Collateral Rate (TGCR): 4.81% (+0.00), volume: $768B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.83% (+0.00), volume: $104B
- Daily Overnight Bank Funding Rate: 4.83% (+0.00), volume: $269B
FED Reverse Repo Operation
RRP usage falls to a new multi-year low of $201.278B vs. $228.946B on Wednesday, today's reverse repo usage the lowest level since May 11, 2021. Number of counterparties at 57 from 54 prior.
MNI PIPELINE: Corporate Debt Roundup
- $4.3B to price Thursday
- Date $MM Issuer (Priced *, Launch #)
- 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 $Benchmark Horizon Mutual Holdings 10Y +195
- 10/31 $550M #Edison Int +7Y +105
MNI BONDS: EGBs-GILTS CASH CLOSE: Gilts Extend Slide In Another Bear Flattening Move
UK yields rose sharply again Thursday as the implications of Wednesday's budget announcement continued to be digested.
- Continued concern over the UK budget's inflationary and bond supply impacts weighed heavily on the UK curve, with the short end underperforming for a 2nd consecutive session as BoE cuts were further priced out.
- Italian and French inflation were largely in line with expectations. But this merely confirmed that after Wednesday's upside surprise in Germany, that Eurozone-wide core HICP failed to decelerate in October, defying expectations coming into the week (flash core was 2.7% Y/Y, vs 2.6% exp. and unch from Sep).
- Yields finished off highs but the damage was done in Gilts in particular.
- The UK curve bear flattened sharply, with Germany's twist flattening. Periphery EGB spreads were mixed, closing off session wides.
- The global focus Friday will be the US employment report, with final October Manufacturing PMIs also featuring.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is up 2.1bps at 2.281%, 5-Yr is up 0.8bps at 2.267%, 10-Yr is up 0.2bps at 2.39%, and 30-Yr is down 2.4bps at 2.595%.
- UK: The 2-Yr yield is up 11.8bps at 4.437%, 5-Yr is up 9.7bps at 4.323%, 10-Yr is up 9.4bps at 4.446%, and 30-Yr is up 4.8bps at 4.88%.
- Italian BTP spread up 1.2bps at 126.2bps / Spanish down 0.4bps at 70.5bps
MNI FOREX: GBPJPY Plummets 1.6% as UK Budget Concerns Dominate
- Spillover from yesterday’s UK Budget detailing more inflationary aspects than expected has pressured the pound on Thursday. Adding this to the sharp weakness for global equity indices, GBPJPY has plummeted 1.6%, erasing a considerable amount of the late October upswing in the process.
- The moves were potentially exacerbated by a moderately hawkish interpretation of the latest Bank of Japan meeting. Bank of Japan Governor Kazuo Ueda on Thursday left the door open to a rate hike in December, saying downside risks to the U.S. economy had fallen, but noting fresh risks stemming from next week’s presidential election.
- As such USDJPY is down 0.75% on the session, briefly printing below 152.00 as a technically overbought condition for the pair is allowed to unwind amid the broader pressure on equities.
- The USD index is just 0.10% in the green as we approach tomorrow’s significant US employment report, emphasising how the moves have been firmly centered around GBP and JPY today.
- Highlighting the sterling weakness, EURGBP has again traded sharply higher, clearing both the 20- and 50-day exponential moving averages in the process, which represents a strong short-term bullish development. Furthermore, spot has also shown above the next key resistance at 0.8434, the Oct 3 high and a potential trend reversal point.
- Clearance of this level would strengthen the developing bullish theme and might target a move to downtrend resistance around 0.8550.
- Swiss CPI cross Friday before the US jobs data. Nonfarm payrolls growth is expected to slow materially to circa 100k in October after a booming 254k in September, with significant disruption from strikes and potential hurricane fallout.
FRIDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 01/11/2024 | 0730/0830 | *** |  CH | CPI |
| 01/11/2024 | 0730/0830 | ** |  CH | Retail Sales |
| 01/11/2024 | 0930/0930 | ** |  GB | S&P Global Manufacturing PMI (Final) |
| 01/11/2024 | - | *** |  US | Domestic-Made Vehicle Sales |
| 01/11/2024 | 1230/0830 | *** |  US | Employment Report |
| 01/11/2024 | 1345/0945 | *** |  US | S&P Global Manufacturing Index (final) |
| 01/11/2024 | 1400/1000 | *** |  US | ISM Manufacturing Index |
| 01/11/2024 | 1400/1000 | * |  US | Construction Spending |