Highlights:
- Price action muted, with markets in the eye of the storm ahead of busy fortnight
- Markets price 25bps Fed cut for November headed into media blackout
- China's standing committee set for early November, markets await stimulus details
- Treasuries sit firmer on the day although are off highs with some help from S&P 500 futures pushing towards yesterday’s high.
- The front end to belly has remained within yesterday’s range throughout but the longer end earlier probed new highs.
- Cash yields are 1-2bp lower, with declines led by 3s. 10Y yields at 4.196% hold their pull back off Wednesday’s 4.256% that had marked fresh highs since July.
- 2s10s came close to lows early in the week but is back near unchanged at 13.8bps.
- TYZ4 is unchanged at 111-09 off an earlier high of 111-14 on subdued volumes of 260k. A bearish trend condition is maintained with support at 111-04 (200-dma) before 110-30+ (Oct 23 low), whilst resistance is seen at 112-14+ (20-day EMA).
- Data: Durable goods Sep prelim (0830ET), U.Mich survey Oct final (1000ET), KC Fed services Oct (1100ET)
- Fedspeak: Collins fireside chat (1100ET), FOMC blackout starts Sat 1200am ET
STIR: 25bp Nov Cut Broadly Priced On Last Day Before FOMC Blackout
- Fed Funds implied rates are 0-1bp lower on the day out to mid-2025 as they on net ebb lower to extend yesterday’s decline and leave a rate path close to where it started the week.
- Cumulative cuts from 4.83% effective: 24bp Nov, 43bp Dec, 60bp Jan and 110bp June.
- Data headlines today’s docket with preliminary durable goods orders before the finalized U.Mich consumer survey.
- In the last day before the FOMC blackout period, today’s sole scheduled Fedspeak comes from Collins (’25 voter) in a fireside chat. She said Oct 8 that rate cuts should be careful and data-based whilst balancing two-risks and being attentive to both mandates. She also viewed recent data as showing the labor market in a good place overall.
CHINA: Standing Committee to Meet From Nov 4th
- China's National People's Congress Standing Committee are set to meet from November 4th - 8th, according to Xinhua, cited by Bloomberg.
- It's at this meeting that markets may receive some specifics on additional fiscal spending to accompany the latest stimulus drive - this is slightly later than expected (end-Oct had been the speculation). Further headlines suggesting China's committee are to review the appointment and removal of officials also suggests fiscal may not be the sole focus of the committee meeting - part market focus should remain regardless.
EUROPE ISSUANCE UPDATE:
Italy auction results
- E2.5bln of the 3.10% Aug-26 BTP Short Term. Avg yield 2.56% (bid-to-cover 1.70x).
- E1bln of the 0.40% May-30 BTPei. Avg yield 1.24% (bid-to-cover 1.70x).
- E1.5bln of the 1.80% May-36 BTPei. Avg yield 1.81% (bid-to-cover 1.55x).
EUROZONE DATA: Robust Spanish Business Sentiment An Anomaly In Big Four
- Today’s Ifo business climate index may have been stronger than expected in October at 86.5 after 85.4 but it paints a far from healthy picture, as discussed earlier.
- There has been a post-pandemic structural break compared to historical relationships with GDP growth, but it nevertheless offers sizeable downside risk to already very weak GDP growth that has languished at either zero or a touch negative for well over a year now.
- It’s a timely reminder of how German growth continues to heavily lag other major Eurozone economies, with significant structural factors at play.
- This is something our policy team have touched on multiple times, including capital misallocation (here) and the related deindustrialisation trend (here) plus specific challenges to its automotive industry (here).
- However, it’s also notable that both France and Italy have also seen waning momentum in business sentiment recently. In particular, the Istat business confidence index fell from 95.6 to 93.4 in today’s October release for its lowest since Apr 2021. The French INSEE business climate index meanwhile at 97.3 in yesterday's October report is off recent lows but remains below its long-term average of 100.
- It leaves Spain, with strong real GDP growth of 3.1% Y/Y and domestic demand growth of 2.5% Y/Y back in Q2 as one of the few significant growth drivers across the Eurozone.
FOREX: EUR fails to break out, NZD eyes first close below $0.60 in two months
- EUR/USD creeping to new daily highs of 1.0837 fails to stick, but has helped the pair break out of the very tight early Friday range. Concurrently, EUR/AUD has failed to show above the overnight highs - keeping the cross below 1.6354 resistance, as lower-than-expected Eurozone CPI expectations counter any hawkish read-through from Simkus comments - who repeated that he doesn't see the need for rate cuts of larger than 25bps.
- Nonetheless, antipodean currencies are underperforming despite the more rangebound equity market. NZD/USD has traded to a new pullback low of 0.5987, showing through the Wednesday low in the process. A close below $0.6000 would be the first since August, exposing 0.5975 support in the process.
- The greenback is somewhat firmer, but generally contained in early Friday trade. The USD Index is either side of the 104.00 handle, holding between the technical parameters of the 104.570 cycle high and the 200-dma support of 103.818.
- Canadian retail sales data is set to cross later today, alongside prelim durable goods numbers for September. Final University of Michigan stats for Octover also cross, but are unlikely to trigger any outsized market moves. Fed's Collins appears in a fireside chat, but the lack of a text release could contain any major policy messages.
EQUITIES: Eurostoxx 50 Futures Continue to Trade Close to Recent Lows
- Eurostoxx 50 futures continue to trade closer to their recent lows. For now, a bear threat remains present. The contract traded sharply lower on Oct 15 and has pierced the 50-day EMA, at 4947.73. A clear break of this average would undermine a recent bullish theme and highlight a stronger reversal. This would open 4884.06, a Fibonacci retracement. Key resistance and the bull trigger is 5106.00, the Sep 30 high. A breach of it would resume the uptrend.
- S&P E-Minis traded lower Wednesday and the contract remains below its recent highs. Short-term weakness is considered corrective and the uptrend remains intact. Price has traded through the 20-day EMA, at 5833.22, but is - for now - trading above this EMA. A clear break of this average would open 5749.80, the 50-day EMA. A stronger resumption of gains would refocus attention on 5961.00, a Fibonacci projection.
COMMODITIES: WTI Futures Above Weekly Low But Bearish Threat Present
- WTI futures are trading above their recent lows. However, a bearish theme remains intact following the Oct 8 - 18 sell-off. A resumption of weakness would threaten the recent bullish theme and expose $65.99, the Oct 1 low, and $64.16, the Sep 10 low and a key support. For bulls, a stronger reversal would instead refocus attention on the key short-term resistance at $77.70, the Oct 8 high. Clearance of this level would resume to the recent uptrend.
- Gold bulls remain in the driver’s seat and price is trading closer to its recent highs. Recent gains resulted in a break of $2685.6, the Sep 26 high, confirming a resumption of the primary uptrend. This week’s extension reinforces the bull theme. Sights are on $2767.1 next, a Fibonacci projection point, ahead of the $2800.0 handle. Firm support is $2673.2, the 20-day EMA. A clear break of this EMA would signal scope for a deeper retracement.
| Date | GMT/Local | Impact | Country | Event |
| 25/10/2024 | 1230/0830 | ** |  CA | Retail Trade |
| 25/10/2024 | 1230/0830 | ** |  US | Durable Goods New Orders |
| 25/10/2024 | 1230/0830 | ** | CA | Retail Trade |
| 25/10/2024 | 1300/1500 | ** |  BE | BNB Business Sentiment |
| 25/10/2024 | 1400/1000 | ** | US | U. Mich. Survey of Consumers |
| 25/10/2024 | 1500/1100 | US | Boston Fed's Susan Collins | |
| 25/10/2024 | 1500/1100 | CA | Finance Dept monthly Fiscal Monitor (expected) | |
| 26/10/2024 | 1520/1620 |  GB | BOE's Bailey panellist at G30 Banking Seminar |
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