EXECUTIVE SUMMARY
- MNI JAPAN: Election Preview Published
- MNI: Fed's Hammack: Housing Inflation Could Stay Elevated
- MNI US DATA: New Home Sales Widen Relative Gap With Existing
- MNI US DATA: Surprisingly Healthy Initial Claims As Various Distortions Fade
- MNI US DATA: Flash PMIs Surprise Firmer But Soft Prices Charged
US
MNI: Fed's Hammack: Housing Inflation Could Stay Elevated
U.S. housing inflation could take a while longer to normalize, Cleveland Fed President Beth Hammack said Thursday, citing bank research showing rents for new tenants are passed through only gradually to existing tenants and official shelter indices. "This raises the possibility that housing services could remain elevated for a while," she said. Housing inflation has declined from its peak, but has stayed higher than analysts expect based on market rents.
MNI FED: Hammack Pushes More Work To Do Message
Cleveland Fed’s Hammack (’24 voter) has offered more extensive comments than expected considering they were only down as “welcome remarks”, in her first meaningful appearance since she assumed her position as Cleveland Fed President. A “more work to do” message is evident, offering similar traits to her predecessor when in office although Mester sounded a little more dovish in remarks she made to MNI after she left the post.
NEWS
MNI JAPAN: Election Preview Published
Japan holds a snap general election on Sunday 27 October with all 465 seats in the lower chamber of the National Diet, the House of Representatives, up for grabs. The contest comes as part of an effort by newly elected Prime Minister Shigeru Ishiba to stamp his authority on the office and reinforce his position as president of the governing Liberal Democratic Party (LDP). Ishiba instructed the dissolution of the House of Representatives on 9 October, having succeeded the outgoing Fumio Kishida as LDP president on 27 September and PM on 1 October.
MNI US: President Biden Signs 'Landmark' National Security Memoradum On AI
US President Joe Biden has signed a National Security Memorandum (NSM) that would direct the federal government to ensure that the United States leads the world in Artificial Intelligence while safeguarding against potential threats the technology poses to national security.
MNI US-CHINA: MOFCOM Decries US Sanctions On Firms Accused Of Russia Drone Supply
Wires carrying comments from a Chinese Commerce Ministry spox. Says, in relation to US sanctions imposed on firms engaged in drone development, that "China firmly opposes unilateral sanctions and long-arm jurisdiction without the basis of international law and the authorisation of the UN Security Council". Says that "China will resolutely safeguard its own legitimate rights and interests." Spox: "China opposes any malicious acts of suppressing and sanctioning Chinese enterprises on the pretext of Russia".
MNI ISRAEL: Efforts To Be Made To Revive Gaza Ceasefire Talks
PM Benjamin Netanyahu's office have confirmed that an Israeli delegation led by the head of Mossad will travel to Doha, Qatar on Sunday 27 October for talks with CIA Director William Burns and Qatari PM Sheikh Mohammed bin Abdulrahman Al Thani in an effort to revive talks on the hostages-for-Gaza ceasefire deal with Hamas.
BBG: "Boeing Workers Spurn Latest Offer as Bid to End Strike Fails -- Boeing Co. factory workers rejected a new labor contract that would have increased their wages by 35% over four years, exacerbating the aircraft manufacturer’s crisis as it struggles to overcome a crippling work stoppage."
BBG: "Harley-Davidson’s Quarterly Sales Drop, Prompting Outlook Cut -- Harley-Davidson Inc.’s motorcycle shipments fell in the latest quarter on lower overall demand and fewer sales of its highest-margin bikes, prompting a downward revision in its full-year forecast. Earnings per share in the quarter ended Sept. 30 came to 91 cents, the company said Thursday, below the $1.38 of a year ago."
MNI CANADA: Trudeau Faces Down Rebels, But Danger For PM Not Over Yet
Prime Minister Justin Trudeau faced down a group of 24 rebel MPs within his governing Liberal Party of Canada (LPC) at a caucus meeting in Ottawa on 23 Oct. With Trudeau's minority gov't comprising 153 LPC lawmakers, the 24 members representing just over 15% of his party caucus voted for him to stand down as leader amid flagging opinion polls and damaging by-election defeats.
MNI RUSSIA: Putin Talks Up 'Multipolarity' In BRICS+ Address
Speaking in the city of Kazan at the BRICS summit, Russian President Vladimir Putin speaks on a number of geopolitical issues. Says that the BRICS+ group (encompassing the nine BRICS members as well as invitees) will 'discuss the peaceful settlements of conflicts [and the] Middle East situation'. Putin decrying actions of the West claims 'There are attempts to curb rival countries in Africa and Asia...there are illegal sanctions, manipulations of currencies'. Says "Ukraine is being used to create strategic threats to Russia...they [the West] are trying to inflict a strategic defeat [on] Russia...those are illusory goals".
MNI US TSYS: Off Data Driven Lows, Still Not Far From Late July Lows
- Treasuries looked to finish higher Thursday, taking cues from EGB flash PMI data overnight. German composite PMI remained in contractionary territory for the fourth consecutive month while French flash October PMIs were weaker than expected for the second consecutive month.
- Early Treasury support evaporated after US Data: Initial jobless claims were notably lower than expected for a second week running, at 227k (sa, cons 242k) in the week to Oct 19 after a marginally upward revised 242k (initial 241k) held onto much of last week’s surprise lower. New home sales were stronger than expected as they increased to an annualized 738k in September (cons 720k) from a downward revised 709k (initial 716k).
- Meanwhile, October flash PMIs fared better than expected across the main sectors as both manufacturing and services indexes increased. The S&P Global press release notes the survey signaling “a further solid rise in business activity to mark a robust start to the fourth quarter”.
- The morning reversal (TYZ4 fell to a session low of 111-03) was short lived, however, the 10Y contract climbing to 111-13.5 by late morning before settling around 111-08.5 (+7.5). Curves bull flattened: 2s10s -3.374 at 12.968, 5s30s -1.861 at 44.115. There were no obvious headline or flow related drivers for the bounce as Treasuries hold near late July levels.
- Look ahead: Friday focus on Durables/Capital Goods and University of Michigan's sentiment/inflation outlook. Next week Friday see's the latest round of employment data for October.
OVERNIGHT DATA
MNI US DATA: Flash PMIs Surprise Firmer But Soft Prices Charged
The October flash PMIs fared better than expected across the main sectors as both manufacturing and services indexes increased.
- Manufacturing: 47.8 (cons 47.5) after 47.3
- Services: 55.3 (cons 55.0) after 55.2
- Composite: 54.3 (cons 53.8) after 54.0.
MNI US DATA: New Home Sales Widen Relative Gap With Existing
- New home sales were stronger than expected as they increased to an annualized 738k in September (cons 720k) from a downward revised 709k (initial 716k).
- The 4.1% M/M increase further widens the relative gulf with existing home sales after they fell -1.0% in September yesterday, with new home sales 8% above pre-pandemic levels vs existing home sales almost 30% below.
- 7.6 months of supply is still high historically and compares to 5.8 in the three Septembers prior to the pandemic, a similar story to the 7.9 vs 6.0 averaged in August.
- Median price growth is volatile, at 0.0% Y/Y after -6.8% Y/Y in Aug, but it remains weaker than the 3.0% Y/Y for existing home sales.
MNI US DATA: Surprisingly Healthy Initial Claims As Various Distortions Fade
- Initial jobless claims were notably lower than expected for a second week running, at 227k (sa, cons 242k) in the week to Oct 19 after a marginally upward revised 242k (initial 241k) held onto much of last week’s surprise lower.
- It has been a volatile few weeks for initial claims, with a recent low of 219k for Sep 21 before jumping to 260k for Oct 5. The four-week average meanwhile climbed further to 239k (+2k) for the highest since early August and before that Aug 2023.
- The six states impacted by Hurricanes Helene and Milton saw cumulative claims of 31.7k (nsa), down from the 34.0k and 36.1k of previous weeks vs the 20-25k more typically seen at this time of year. That’s impressive considering this latest week appeared likely to see the greatest Milton impact as it came towards the end of the prior week’s survey period.
- Other relative improvements came from a further unwinding of what are seen as autos-related shutdowns in Michigan (back to 6.5k after 8.3k and 16.2k previously) and slightly less impact from Boeing strikes (Washington & Oregon saw claims of 11.5k vs 12.4k the previous week).
MNI US DATA: Continuing Claims Offer Sign Of Weaker Re-Hiring Prospects
Initial jobless claims saw a marked improvement in the week to Oct 19 but continuing claims offered a more cautious take in the week to Oct 12, a payrolls reference period. Continuing claims surprisingly increased to 1896k (sa, cons 1875k) after 1869k (initial 1867k), easily through recent highs of 1871k in July for fresh highs since Nov 2021.
MNI CANADA DATA: Employment Insurance Up in Aug, +1.5% MOM, +5.6% YOY
Employment insurance recipients +1.5% MOM in August or by 7.4K. This is the third increase in four months after holding relatively steady from September to April. YOY recipients +5.6% led by manufacturing and utilities and sciences.
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 127.3 points (-0.3%) at 42387.82
S&P E-Mini Future up 13.75 points (0.24%) at 5851.75
Nasdaq up 143.5 points (0.8%) at 18420.88
US 10-Yr yield is down 4 bps at 4.2058%
US Dec 10-Yr futures are up 6.5/32 at 111-7.5
EURUSD up 0.0041 (0.38%) at 1.0823
USDJPY down 0.86 (-0.56%) at 151.9
Gold is up $19.16 (0.71%) at $2734.72
European bourses closing levels:
EuroStoxx 50 up 12.9 points (0.26%) at 4935.45
FTSE 100 up 10.74 points (0.13%) at 8269.38
German DAX up 65.38 points (0.34%) at 19443
French CAC 40 up 5.8 points (0.08%) at 7503.28
US TREASURY FUTURES CLOSE
3M10Y -1.844, -41.868 (L: -46.32 / H: -39.456)
2Y10Y -3.204, 13.138 (L: 12.57 / H: 17.041)
2Y30Y -4.142, 39.462 (L: 39.107 / H: 45.006)
5Y30Y -1.908, 44.068 (L: 43.855 / H: 47.723)
Current futures levels:
Dec 2-Yr futures up 1.125/32 at 103-5.75 (L: 103-04.5 / H: 103-08.125)
Dec 5-Yr futures up 3.75/32 at 107-25 (L: 107-20.75 / H: 107-30)
Dec 10-Yr futures up 6/32 at 111-7 (L: 110-31 / H: 111-13.5)
Dec 30-Yr futures up 21/32 at 118-22 (L: 117-29 / H: 119-01)
Dec Ultra futures up 27/32 at 125-23 (L: 124-21 / H: 126-05)
MNI US 10YR FUTURE TECHS: (Z4) Trend Needle Points South
- RES 4: 113-12 Low Sep 3 and a recent breakout point
- RES 3: 113-03+ 50-day EMA
- RES 2: 112-22 High Oct 16 and a key short-term resistance
- RES 1: 112-18+ 20-day EMA
- PRICE: 111-11 @ 1405 ET Oct 24
- SUP 1: 111-04/110-30+ 200-dma / Low Oct 23
- SUP 2: 110-13 61.8% retracement of the Apr - Sep bull cycle (cont)
- SUP 3: 110-00 Round number support
- SUP 4: 109-22 2.0% 10-dma envelope
The trend condition in Treasuries remains bearish and price traded to a fresh cycle low Wednesday. Recent weakness has resulted in a breach of the bear trigger at 111-22, the Oct 10 low. Note too that the 200-dma at 111-04 has been pierced - a bearish development. A continuation lower would open 110-13, a Fibonacci retracement. Initial firm resistance has been defined at 112-22, the Oct 16 high.
SOFR FUTURES CLOSE
Dec 24 +0.020 at 95.610
Mar 25 +0.035 at 95.980
Jun 25 +0.030 at 96.235
Sep 25 +0.025 at 96.390
Red Pack (Dec 25-Sep 26) +0.025 to +0.030
Green Pack (Dec 26-Sep 27) +0.030 to +0.035
Blue Pack (Dec 27-Sep 28) +0.035 to +0.045
Gold Pack (Dec 28-Sep 29) +0.045 to +0.050
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00574 to 4.73759 (-0.02147/wk)
- 3M -0.00889 to 4.62587 (-0.00576/wk)
- 6M -0.00294 to 4.45486 (+0.01115/wk)
- 12M +0.00919 to 4.16561 (+0.03330/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.83% (+0.00), volume: $2.129T
- Broad General Collateral Rate (BGCR): 4.82% (+0.00), volume: $808B
- Tri-Party General Collateral Rate (TGCR): 4.82% (+0.00), volume: $773B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.83% (+0.00), volume: $99B
- Daily Overnight Bank Funding Rate: 4.83% (+0.00), volume: $259B
FED Reverse Repo Operation: Second New Multi-Year Low of the Week
RRP usage falls to a new multi year low for the second time this week: to $202.798B from $270.839 yesterday. This after usage fell to $237.760B Tuesday -- lowest since mid-May 2021. Number of counterparties fall to 53 after surging to 84 yesterday.
MNI BONDS: EGBs-GILTS CASH CLOSE: Gilts Clear Underperformer On Fiscal Plans
- Gilts have been a clear underperformer today, with 10Y yields rising 3.6bps vs mostly 3.8-4.7bp declines across EGBs owing to idiosyncratic fiscal factors around Chancellor Reeves’ rule amendments.
- See here, here and here plus initial analysis here about how the news outweighed dovish comments from the BoE’s Bailey.
- EGBs meanwhile have been supported by a sharp rolling over in oil futures and equities also fading.
- In data, the German PMIs were stronger than consensus but the underlying details were still weak, keeping focus on tomorrow's IFO survey. The French PMI was weaker than expected, while the rest of the Eurozone once again outperformed the region's two largest economies.
- It meant the Eurozone services PMI was slightly softer than expected at 51.2 (cons 51.5) after 51.4 vs a stronger but a still depressed manufacturing PMI of 45.9 (cons 45.1) after 45.0, netting out for little change for the composite PMI.
- In latest ECBspeak, Lane noted that backward-looking components are still playing out but the disinflation process is well on track with inflation set to return to target in the course of 2025. Muller isn’t worried about falling behind the curve and sees the best policy choice being measures rate cuts.
- Closing Yields / 10-Yr Periphery EGB Spreads To Germany:
- Germany: The 2-Yr yield is down 2.7bps at 2.076%, 5-Yr is down 3.4bps at 2.079%, 10-Yr is down 3.8bps at 2.266%, and 30-Yr is down 3.8bps at 2.587%.
- UK: The 2-Yr yield is up 4.9bps at 4.143%, 5-Yr is up 5.1bps at 4.09%, 10-Yr is up 3.7bps at 4.237%, and 30-Yr is up 3.3bps at 4.764%.
- Italy / German 10-Yr spread 0.8bps tighter at 120.8bps
MNI FOREX: Greenback Loses Ground as US Yields Slip Off Recent Highs
- US yields have reversed a small portion of this week’s march higher and accordingly, the USD index is roughly 0.3% lower on the session. Given the ongoing sensitivity of the Japanese Yen to movements in core yields, USDJPY has also sold off on Thursday, dipping 0.7% to trade back below 152.00 as we approach the APAC crossover.
- The pair remains roughly 1.5% higher on the week and given the strong rally across October, initial support is not found until 150.50, Tuesday’s low and firm support remains much further down at 147.77, the 50-day EMA.
- Yen volatility is likely to remain the clear focus for currency markets as the primary driver for sentiment remains core yields and next week’s busy calendar includes snap legislative elections in Japan, the BOJ decision and key growth & employment data prints in the US.
- Broad dollar weakness was a consistent theme across the rest of G10, with the likes of EURUSD and GBPUSD rising between 0.25-0.30%. While a bearish theme continues to dominate for cable, today’s positive session sees the pair break a losing streak of three consecutive sessions this week. As such, EURGBP continues to hover just above the multi-year support level of 0.8300.
- USDCAD bucks the trend and has seen a solid move higher today following the BOC meeting yesterday. USDCAD has probed the week’s high of 1.3863 in recent trade and the technical set-up continues to lean bullish with firmer clearance here opening a key resistance at 1.3946 (Aug 5 high) after which lies the psychological 1.4000 mark.
- Friday’s data highlight is Canadian retail sales, although German IFO and Eurozone M£ money supply data is also due, as well as US durable goods.
FRIDAY DAYA CALENDAR
| Date | ET | Impact | Period | Release | Prior | Consensus | |
| 25/10/2024 | 0830 | ** | Sep | Durable Goods New Orders m/m | 0.0 | -1.0 | % |
| 25/10/2024 | 0830 | ** | Sep | Durable New Ords (x-trnsp) m/m | 0.5 | -0.1 | % |
| 25/10/2024 | 0830 | ** | Sep | Previous Durable Goods New Orders Ex Transportation Revised SA m/m percent change | -- | -- | % |
| 25/10/2024 | 0830 | ** | Sep | Previous Durable Goods New Orders Revised SA m/m percent change | -- | -- | % |
| 25/10/2024 | 1000 | ** | Oct | U. Mich Consumer Expectations | 72.9 | -- | |
| 25/10/2024 | 1000 | ** | Oct | U. Mich Consumer Sentiment | 68.9 | 69.5 | |
| 25/10/2024 | 1000 | ** | Oct | U. Mich Current Economic Conditions | 62.7 | -- |