EXECUTIVE SUMMARY
- MNI US DATA: CPI Core & Supercore Latest Trends
- MNI FED: Rates Headed To Neutral Over Time - Williams
- MNI FED: Goolsbee Sees More “Close Call” Meetings Ahead
- MNI US DATA: Upside CPI Surprise Probably Won't Fully Translate Into PCE
- MNI US DATA: Hurricane Helene Drives A Sizeable Share Of Initial Claims Jump
US
MNI FED: Rates Headed To Neutral Over Time - Williams
The U.S. labor market is solid, inflation is closing in on 2% and the Federal Reserve is finally lowering interest rates to a "more neutral setting over time," New York Fed President John Williams said Thursday. He painted the very picture of a soft landing for the U.S. economy after it was rocked by the worst inflation in decades, forecasting GDP to expand 2.25%-2.5% this year, the unemployment rate to peak at 4.25% this year and next, and inflation to end the year at 2.25% before falling close to 2% next year. Those numbers are slightly better than the median projections from the FOMC last month.
MNI FED: Goolsbee Sees More “Close Call” Meetings Ahead
Chicago Fed’s Goolsbee (’25 voter) has talked to CNBC after today’s CPI report, viewing it as around expectations which ties in with the notion that core CPI may have been hotter than expected but it might not translate through to core PCE. Unsurprising for the most dovish member of the FOMC, he notes the softest rental inflation. His “close call” comments are interesting considering that’s how the WSJ/FT blackout steers were phrased.
NEWS
MNI US: Race For Control Of The Senate Moves Further Away From Democrats
A new set of polls from the New York Times/Siena College has shown the race for control of the Senate appears to be drifting even further away from Democrats. The surveys show Democrat Senator Jon Tester (D-MT) trailing Republican challenger Tim Sheehy (R) by seven points in Montana. If Tester fails to retain his seat, Republicans will be heavily favoured to flip control of the Senate.
MNI US: Trump To Expand Policy On Chinese Autos In Detroit Speech
Reuters carrying excerpts from former President Donald Trump's speech at the Detroit Economic Club. According to Reuters, Trump will propose "a 'Made in America' corporate tax rate of 15% for US manufacturers" and "bar all Chinese autonomous vehicles from traveling on US roads." Trump will also say if elected he will, "formally notify Mexico, Canada of his plan to invoke six-year renegotiation provision of USMCA to address concerns about Chinese auto production."
MNI SECURITY: Tensions Remain High As Middle East Braces For Israeli Strike On Iran
Tensions in the Middle East remain at multi-month highs as Israel expands its ground operation in Lebanon, continues extraterritorial strikes on Iran's proxies, and remains tight-lipped about its response to Iran's ballistic missile strike. Oil markets spiked on a headline from Israel's Channel 14: "Biden asked not to attack nuclear or oil facilitiesin Iran, Netanyahu responded that it is a historic opportunity." Israeli Defense Minister Yoav Gallant said yesterday that Israel's response to Iran would be "lethal, precise and, above all, surprising."
(BBG) PBOC Starts $71 Billion Liquidity Tool for Stock Investors
China’s central bank has set up a swap facility to provide liquidity to institutional investors to buy stocks, part of a broad stimulus package announced earlier that ignited a rally in equities.
(BBG) Domino’s Pares Back Its Outlook for Sales and Store Growth
Domino’s Pizza Inc. trimmed its 2024 projection for sales growth and new locations as slower consumer spending hits the restaurant industry. The pizza chain now expects annual global retail sales growth of 6%, below its long-term target of 7% or more.
(DJ) Delta Air: 3Q EPS Cut 45c by Impact of CrowdStrike-Related Outage
US TSYS
MNI US TSYS: Curves Twist Steeper, Projected Rate Cuts Consolidate
Treasuries look to finish mixed after a volatile first half. Markets are still digesting this morning's higher than expected CPI and weekly jobless claims while Fed speak came out mixed: Atlanta Fed Bostic saying the door is open to skipping a rate cut at the next November, while NY Fed Williams sees a solid U.S. labor market and inflation is closing in on 2% over time.
- Initial jobless claims for the six states most heavily impacted by Hurricane Helene saw non-seasonally adjusted claims rise to 35.5k vs closer to the 20k or even a little below that is typical for the time of year.
- The upside surprise in September CPI (headline 0.18% M/M vs 0.08% expected, Core 0.31% vs 0.25% expected) was driven by multiple factors - which may not be translated into the Fed's preferred PCE gauge, potentially mitigating the upside surprise from a market perspective.
- Short end disconnected as Tsy curves twisted steeper (2s10ss +5.147 at 9.831), while projected rate cuts have scaled back from this morning's post-data highs (*): Nov'24 cumulative -20.7bp (-22.7bp), Dec'24 -44.2bp (-46.5bp), Jan'25 -63.9bp (-68.9bp).
- Strong 30Y Bond auction reopen traded through: 4.389% high yield vs. 4.405% WI; 2.50x bid-to-cover vs. 2.38x in the prior month. Indirect take-up surged to new all-time high of 80.47% vs. 68.68% prior; direct bidder take-up 7.37% vs. 15.66% prior; primary dealer take-up 12.16% vs. 15.66% prior.
- Focus turns to Friday's PPI and University of Michigan inflation expectations, as well as the start of the latest earning cycle with several banks reporting before the open: Wells Fargo, JP Morgan, Bank of NY Mellon and Blackrock.
OVERNIGHT DATA
MNI US DATA: Upside CPI Surprise Probably Won't Fully Translate Into PCE
The upside surprise in September CPI (headline 0.18% M/M vs 0.08% expected, Core 0.31% vs 0.25% expected) was driven by multiple factors - which may not be translated into the Fed's preferred PCE gauge, potentially mitigating the upside surprise from a market perspective - see image below for summary.
MNI US DATA: CPI Core & Supercore Latest Trends
Core CPI (SA)
% M/M: 0.312 in Sep'24 after 0.281 in Aug'24
% 3mth ar: 3.1 in Sep'24 after 2.1 in Aug'24
% 6mth ar: 2.6 in Sep'24 after 2.7 in Aug'24
CPI Core Services Non-Housing (SA)
% M/M: 0.404 in Sep'24 after 0.328 in Aug'24
% 3mth ar: 3.8 in Sep'24 after 2.0 in Aug'24
% 6mth ar: 2.6 in Sep'24 after 3.1 in Aug'24
Source: Bloomberg, MNI
MNI US DATA: Hurricane Helene Drives A Sizeable Share Of Initial Claims Jump
Initial jobless claims for the six states most heavily impacted by Hurricane Helene saw non-seasonally adjusted claims rise to 35.5k vs closer to the 20k or even a little below that is typical for the time of year. Very roughly speaking, it could have biased the SA figure higher by around 15k or so. The SA figure of 258k was 28k higher than consensus of 230k after 225k the week prior, although how much of the miss it accounted for depends on what was already factored into consensus.
MNI US DATA: Main Rental Items A Little Softer Than Expected In September
Main rental items a little softer than expected: OER: 0.33 vs an average estimate of 0.36% M/M (ranging from 0.32-0.42) after 0.50%; Primary rents: 0.28 vs an average estimate of 0.32% M/M (0.29-0.35) after 0.37%.
MNI US DATA: CPI Core Services Ex-Housing ("Supercore") - September
Strong supercore:
Core services excl OER & primary rents ('supercore'): 0.404% M/M after 0.328%. Latest 3mth av of 0.313%
Core services excl all shelter: 0.527% M/M after 0.264%. Latest 3mth av of 0.349%
Limited analyst estimates for ex OER & rents had averaged 0.27% M/M, ranging from 0.20 to 0.34
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 57.88 points (-0.14%) at 42454.12
S&P E-Mini Future down 12.75 points (-0.22%) at 5828.5
Nasdaq down 9.6 points (-0.1%) at 18282.05
US 10-Yr yield is down 0.4 bps at 4.0687%
US Dec 10-Yr futures are up 1/32 at 112-7.5
EURUSD down 0.0003 (-0.03%) at 1.0936
USDJPY down 0.77 (-0.52%) at 148.54
WTI Crude Oil (front-month) up $2.7 (3.69%) at $75.95
Gold is up $21.92 (0.84%) at $2629.66
European bourses closing levels:
EuroStoxx 50 down 12.23 points (-0.25%) at 4970.34
FTSE 100 down 6.01 points (-0.07%) at 8237.73
German DAX down 44.03 points (-0.23%) at 19210.9
French CAC 40 down 18.5 points (-0.24%) at 7541.59
US TREASURY FUTURES CLOSE
3M10Y +0.449, -58.722 (L: -61.845 / H: -53.892)
2Y10Y +5.618, 10.302 (L: 2.248 / H: 12.525)
2Y30Y +8.386, 39.891 (L: 28.845 / H: 42.946)
5Y30Y +5.005, 47.235 (L: 40.649 / H: 49.244)
Current futures levels:
Dec 2-Yr futures up 3/32 at 103-14.125 (L: 103-04.5 / H: 103-15.125)
Dec 5-Yr futures up 3/32 at 108-14.25 (L: 107-30.5 / H: 108-16.75)
Dec 10-Yr futures up 1/32 at 112-7.5 (L: 111-22 / H: 112-11.5)
Dec 30-Yr futures down 9/32 at 120-16 (L: 119-28 / H: 120-30)
Dec Ultra futures down 19/32 at 128-3 (L: 127-04 / H: 128-24)
US 10YR FUTURE TECHS: (Z4) Bear Threat Remains Present
- RES 4: 115-00+ High Oct 1
- RES 3: 114-01+ 20-day EMA
- RES 2: 113-25 50-day EMA
- RES 1: 113-12 Low Sep 3 and a recent breakout level
- PRICE: 112-10+ @ 16:46 BST Oct 9
- SUP 1: 112-10 Low Oct 8/9
- SUP 2: 112-00 Round number support
- SUP 3: 111-14 50.0% retracement of the Apr - Sep bull cycle (cont)
- SUP 4: 111-00 Low Jul 22
A bear threat in Treasuries remains present and the contract is trading at its recent lows. The latest sell-off has resulted in a break of the 50-day EMA and this has been followed by a breach of 113-12, the Sep 3 low. The move undermines the recent bullish theme and instead highlights potential for a continuation lower. Sights are on the 112-00 handle next. 113-12, the Sep 3 low, is the first resistance.
SOFR FUTURES CLOSE
Dec 24 +0.020 at 95.680
Mar 25 +0.060 at 96.085
Jun 25 +0.070 at 96.355
Sep 25 +0.065 at 96.515
Red Pack (Dec 25-Sep 26) +0.030 to +0.055
Green Pack (Dec 26-Sep 27) +0.005 to +0.030
Blue Pack (Dec 27-Sep 28) -0.015 to steady
Gold Pack (Dec 28-Sep 29) -0.03 to -0.02
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.01903 to 4.80396 (-0.04162/wk)
- 3M -0.00238 to 4.65590 (+0.07192/ wk)
- 6M +0.00291 to 4.44872 (+0.16773/wk)
- 12M +0.01948 to 4.14742 (+0.28160/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.83% (-0.01), volume: $2.220T
- Broad General Collateral Rate (BGCR): 4.82% (-0.01), volume: $808B
- Tri-Party General Collateral Rate (TGCR): 4.82% (-0.01), volume: $768B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.83% (+0.00), volume: $94B
- Daily Overnight Bank Funding Rate: 4.83% (+0.00), volume: $239B
FED Reverse Repo Operation
RRP usage recedes to $322.587B this afternoon from $343.448B prior. Compares to $239.386B on Monday September 16 2024 -- the lowest level since early May 2021. Number of counterparties at 68 from 71 prior.
PIPELINE
A total of $7.15B high grade corporate debt priced Wednesday, $30.54B running total for the week. Corporate issuance is expected to dry up in the near term, however, as the next earnings cycle picks up steam Friday with Wells Fargo, Bank of NY Mellon, JP Morgan and Blackrock reporting before the open.
EGBS
BONDS: EGBs-GILTS CASH CLOSE: Twist Steepening, Long-End Gilts Underperform
Short-end core yields and periphery EGBs outperformed Thursday, with Gilts notably underperforming.
- US CPI, the week's main event, initially saw core global FI sell off on higher-than-expected readings, but the move reversed as the details looked more benign and the jobless claims report that came out alongside showed unexpected (potentially hurricane-related) weakness.
- The German and UK curves both twist steepened, with yields falling at the short end of the curve.
- Indeed, implied BoE and ECB cuts jumped after the US data, reversing a pullback earlier in the session, with cumulative cuts by mid-2025 upped 2bp and 4bp respectively on the day (25bp cuts at the respective upcoming meetings remained over 90% priced).
- But Gilts underperformed at the long end, with uncertainty over the new government's budget a lingering theme.
- Periphery EGB spreads tightened after the US data, mirroring the move in central bank cut pricing.
- Friday brings UK monthly activity data, final German September CPI, and a speech by ECB's Holzmann.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is down 2.7bps at 2.233%, 5-Yr is down 1.3bps at 2.112%, 10-Yr is down 0.1bps at 2.256%, and 30-Yr is up 0.6bps at 2.548%.
- UK: The 2-Yr yield is down 0.2bps at 4.187%, 5-Yr is up 1.7bps at 4.081%, 10-Yr is up 3bps at 4.21%, and 30-Yr is up 3.3bps at 4.751%.
- Italian BTP spread down 2.3bps at 127.7bps / Spanish down 1.9bps at 73.6bps
FOREX
MNI FOREX: EURUSD Reaches Two-Month Low Following US Inflation Data
- Stronger-than-expected September inflation data in the US was released alongside higher-than-expected weekly jobless claims and while prompting immediate volatility across currency markets, the mixed figures have left the USD index close to unchanged on Thursday.
- An initial blip higher on the CPI figures was immediately reversed, echoing the move lower for front end yields in the US. Understandably, this was most notable for USDJPY which after printing 149.55, quickly traded down to fresh session lows of 148.30.
- While some intra-day volatility remained, this immediate post-data range held in place for USDJPY throughout the remainder of the session. Topside sights are on 150.76, the 50% retracement for the Jul 3 - Sep 16 bear leg.
- EURUSD’s reaction was not as significant and despite some two way action, the bias remains tilted to the downside for the pair. Late comments from Fed’s Bostic, who effectively closed the door on a 50bp cut in November, assisted EURUSD to the lowest level in two months.
- The pair briefly reached 1.0900 with 1.0881 marking the next support point, the 76.4% retracement of the Aug 1 - Sep 25 bull leg.
- Haven demand amid some moderate weakness for equities places the Swiss franc at the top of the G10 leaderboard today, as EURCHF edged back below 0.9400 and sits close to 0.9350 mas we approach the APAC crossover.
- UK GDP and Canadian employment data headlines the calendar on Friday. US PPI is also set for release.
FRIDAY DATA CALENDAR
| Date | ET | Impact | Period | Release | Prior | Consensus | |
| 11/10/2024 | 0830 | *** | Sep | Final Demand PPI ex. food and energy y/y | 2.4 | 2.7 | % |
| 11/10/2024 | 0830 | *** | Sep | Final Demand PPI ex. food, energy, and trade services y/y | 3.3 | -- | % |
| 11/10/2024 | 0830 | *** | Sep | Final Demand PPI m/m | 0.2 | 0.1 | % |
| 11/10/2024 | 0830 | *** | Sep | Final Demand PPI y/y | 1.7 | 1.6 | % |
| 11/10/2024 | 0830 | *** | Sep | PPI ex-food, energy, trade m/m | 0.3 | -- | % |
| 11/10/2024 | 0830 | *** | Sep | PPI ex. food and energy m/m | 0.3 | 0.2 | % |
| 11/10/2024 | 1000 | ** | Oct | U. Mich Consumer Expectations | 74.4 | -- | |
| 11/10/2024 | 1000 | ** | Oct | U. Mich Consumer Sentiment | 70.1 | 70 | |
| 11/10/2024 | 1000 | ** | Oct | U. Mich Current Economic Conditions | 63.3 | -- | |
| 11/10/2024 | 1200 | *** | 15/16 | Corn Ending Stocks current year | -- | -- | (m) |
| 11/10/2024 | 1200 | *** | 15/16 | Corn Production current year | -- | -- | (m) |
| 11/10/2024 | 1200 | *** | 15/16 | Corn yield per acre current year | -- | -- | |
| 11/10/2024 | 1200 | *** | 15/16 | Cotton Ending Stocks current year | -- | -- | (m) |
| 11/10/2024 | 1200 | *** | 15/16 | Cotton Production current year | -- | -- | (m) |
| 11/10/2024 | 1200 | *** | 15/16 | Soybeans - Ending Stocks current year | -- | -- | (m) |
| 11/10/2024 | 1200 | *** | 15/16 | Soybeans Production current year | -- | -- | (m) |
| 11/10/2024 | 1200 | *** | 15/16 | Soybeans yield per acre current year | -- | -- | |
| 11/10/2024 | 1200 | *** | 15/16 | Wheat - Ending Stocks current year | -- | -- | (m) |
| 11/10/2024 | 1200 | *** | 15/16 | Wheat Production current year | -- | -- | (m) |