Highlights:
- UK markets poised for tax rises, higher infrastructure spending and fiscal rules change at today's Budget
- German regional CPIs pose upside risk for national reading
- Sizeable earnings today include Meta Platforms, Microsoft in one of the busiest sessions of the quarter
- Treasuries have pushed higher ahead of important US data, having faded some stronger European data with perhaps greater spillover from a strong rally in Gilts ahead of a highly anticipated UK Budget.
- Cash yields are 1.5-3.8bp lower on the day, flattening with 2s10s down to 14bps (-2bp) back near lows for the week.
- TYZ4 trades at 111-02 (+10) off an earlier 111-04+, on strong cumulative volumes of 465k that have kicked relatively higher in London hours. Resistance is seen at 111-14 (Oct 25 high) whilst the bounce is deemed corrective with support at 110-09+ (Oct 29 low).
- Today’s macro focus is on ADP employment before the Q3 advance release for GDP/PCE. Another heavy earnings slate sees additional attention, albeit headlined by both Microsoft and Meta after market.
- Data: MBA mortgages Oct 25 (0700ET), ADP employment Oct (0815ET), GDP/PCE Q3 advance (0830ET), Pending home sales Sep (1000ET)
- Bill issuance: US Tsy $64B 17W Bill auction (1130ET)
STIR: US Spillover From Stronger European Data Reversed
- Fed Funds implied rates have already reversed a brief lift off overnight lows on spillover from strong Eurozone GDP Q3 advance readings and German regional inflation.
- They’re back little changed to almost 2bps lower on the day, near lows for the week but with mid-2025 implied rates still elevated ahead of ADP employment for Oct and the Q3 GDP/PCE advance report.
- Cumulative cuts from 4.83% effective: 24.5bp Nov, 45bp Dec, 62bp Jan and 109bp June.
- The Jun’25 implied rate of 3.74% has cooled from 3.82% highs on Monday but is still much higher than the 3.30% seen ahead of last month’s NFP report.
US TSY FUTURES: OI Points To Short Cover & Long Setting On Tuesday
The combination of yesterday’s rally in Tsy futures and OI points to a mix of net short cover through TY futures and net long setting further out the curve.
- The net long setting seen across UXY, US & WN futures tilted the curve-wide net DV01 equivalent swing that way on the day.
| 29-Oct-24 | 28-Oct-24 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,525,438 | 4,537,227 | -11,789 | -433,749 |
FV | 6,244,622 | 6,272,791 | -28,169 | -1,190,217 |
TY | 4,589,858 | 4,640,279 | -50,421 | -3,226,232 |
UXY | 2,197,028 | 2,173,919 | +23,109 | +2,048,033 |
US | 1,813,488 | 1,792,744 | +20,744 | +2,695,463 |
WN | 1,736,872 | 1,731,341 | +5,531 | +1,116,144 |
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| Total | -40,995 | +1,009,441 |
STIR: Long Setting In SOFR Whites Dominated On Tuesday
Yesterday’s rally in most SOFR futures and preliminary OI data points to a mix of net long setting and short cover, with the only meaningful swings in contract OI coming via apparent net long setting in SFRH5 & M5.
| 29-Oct-24 | 28-Oct-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRU4 | 1,258,971 | 1,251,188 | +7,783 | Whites | +45,408 |
SFRZ4 | 1,152,647 | 1,156,856 | -4,209 | Reds | +187 |
SFRH5 | 1,036,050 | 1,006,290 | +29,760 | Greens | -7,116 |
SFRM5 | 876,288 | 864,214 | +12,074 | Blues | +9,504 |
SFRU5 | 714,302 | 710,763 | +3,539 |
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SFRZ5 | 861,403 | 856,364 | +5,039 |
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SFRH6 | 581,967 | 586,036 | -4,069 |
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SFRM6 | 584,656 | 588,978 | -4,322 |
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SFRU6 | 511,620 | 522,628 | -11,008 |
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SFRZ6 | 622,162 | 624,987 | -2,825 |
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SFRH7 | 369,623 | 367,702 | +1,921 |
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SFRM7 | 319,378 | 314,582 | +4,796 |
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SFRU7 | 258,272 | 253,269 | +5,003 |
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SFRZ7 | 248,371 | 248,167 | +204 |
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SFRH8 | 191,893 | 190,600 | +1,293 |
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SFRM8 | 156,653 | 153,649 | +3,004 |
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UK FISCAL: Chancellor To Deliver First Labour Budget For 14 Years At 1230GMT
Chancellor of the Exchequer Rachel Reeves is set to deliver the first Budget statement from a Labour gov't since March 2010 this afternoon at 1230GMT (0830ET, 1330CET). Reeves will speak in the House of Commons following prime minister's questions (the final session that former PM and current Leader of the Opposition Rishi Sunak will take part in), and a live stream of the statement can be found here.
- The significant time period between Labour's election win on 4 July and the Budget today - the longest gap between a new gov't and its first budget since 1970 - has allowed for rampant media speculation regarding the Budget's likely contents.
- The tone taken by PM Sir Keir Starmer and Reeves towards the Budget has been one of fixing the problems they say were left by the previous Conservative administration. However, these comments' downbeat nature has contributed to a negative feedback loop.
- As the latest More in Common poll reports, "Heading into the Budget this Autumn, Britons are deeply worried. 68 per cent say they are pessimistic about the Budget and the word cloud on the budget shows how concerned people are. The top words used to describe how people feel about the budget are “worried”, “nervous”, and “apprehensive”. Such emotional tension before a scheduled budget event is deeply unusual."
Chart 1. Sir Keir Starmer Approval Rating
Source: More In Common, Deltapoll, Opinium, YouGov, BMG, Wethink, MNI
EUROPEAN INFLATION: Upside Risks To German National CPI From State-Level Data
State-level data currently suggests upside risks to the 0.2% M/M national consensus (due at 1300GMT/1400CET today).
- The three largest states all saw monthly inflation exceed 0.2%: NRW at 0.3% M/M, Bavaria at 0.5% and Baden Wuerttemberg at 0.7%.
- Hesse, Saxony, and Saxony Anhalt also saw strong monthly readings.
- Taken alongside the firmer than expected German Q3 flash GDP print, ECB-dated OIS now price 30bps of easing through the December meeting (vs 35bps pre-data), pulling back expectations for a 50bp cut.
FOREX: UK Budget in Focus, EUR Buoyed on Firm German Regional CPIs
- The UK Budget takes focus ahead, at which the UK Chancellor Reeves outlines the first Labour budget in over 15 years - and is expected to show a series of tax rises and a change in fiscal rules. While GBP vols have ticked higher headed into the release, the vol premium is comfortably below that seen across 3 of the past 4 UK fiscal events - supporting the theory that while infrastructure spending is to rise in the coming parliament, there will be little to deter the Bank of England's current easing trajectory toward neutral.
- GBP/USD trades back above the 1.3000 level, but gains at these levels are considered corrective as part of the bear leg off the September high. On the upside, initial firm resistance to watch is 1.3065, the 50-day EMA. A clear breach of this average is required to signal any reversal.
- EUR trades well, gaining against most others as regional German CPI prints point to upside risks for the national reading - with the three largest states all seeing monthly inflation top 0.2% - Baden-Wuettemberg was a particularly high reading at 0.7% M/M. The national print follows later today at 1300GMT.
- US data today includes the advance reading for Q3 GDP, with ADP employment change and pending home sales also on the docket. The Fed remain inside the pre-decision media blackout, leaving speaker focus on ECB's Schnabel, Villeroy and Nagel, with BoC's Macklem and Rogers to make a second appearance of the week.
FOREX: GBP Poised for Unremarkable Budget Reaction, USD Makes Early Losses
- We wrote yesterday that FX vol markets are priming for a more muted reaction to today's Budget relative to 3 of the last 4 fiscal events - with prevailing implied vols considerably lower today than they were for Kwarteng Sep'22, Hunt Nov'22 and Hunt Mar'23. That remains the case this morning, implying a ~60 pip swing in GBP/USD and ~30 pip swing in EUR/GBP, suggesting that while Reeves intends to make broad changes to fiscal rules, the structure of taxation and, thereby, the Gilt remit - the impact on the BoE's policy cycle will be minimal - and the uptick in infrastructure spending gradual enough to leave the BoE to proceed with sequential rate cuts toward neutral.
- Despite the show back above 1.30, the trend theme in GBPUSD remains bearish and short-term gains are considered
corrective. On the upside, initial firm resistance to watch is 1.3065, the 50-day EMA. A clear breach of this average is required to signal any reversal. - The greenback is softer against all others in G10 after a slow start, with a minor break lower from the contained overnight trade for US yields working against the currency and aiding new EUR/USD intraday highs, and new USD/JPY intraday lows.
OPTIONS: Expiries for Oct30 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0750(E565mln), $1.0775-90(E1.0bln), $1.0800(E628mln), $1.0835-50(E1.2bln), $1.0925(E1.0bln), $1.1000(E1.4bln)
- USD/JPY: Y152.50($879mln), Y154.00($508mln)
- AUD/USD: $0.6600(A$755mln), $0.6675(A$565mln)
- USD/CAD: C$1.3800-20($5.2bln)
- USD/CNY: Cny7.1000($807mln), Cny7.1200($539mln), Cny7.1500($1.2bln)
EQUITIES: E-Mini S&P Uptrend Intact, Contract Still Above 20-Day EMA
- Eurostoxx 50 futures continue to trade within its recent range. For now, a bear threat still remains present. The contract traded sharply lower on Oct 15 and has pierced the 50-day EMA, at 4950.11. 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 unchanged at 5106.00, the Sep 30 high.
- S&P E-Minis continue to trade below their recent highs. However, recent S/T weakness is considered corrective and the uptrend remains intact. Price has recently traded through support at the 20-day EMA, at 5840.25, but is - for now - trading above this average once again. A clear bearish break of the EMA would open 5762.24, the 50-day EMA. For bulls, a stronger resumption of gains would refocus attention on 5961.00, a Fibonacci projection.
COMMODITIES: WTI Futures Trading Just Ahead of Recent Lows
- A bearish theme in WTI futures remains intact and this week’s move lower reinforces this theme. A continuation down would expose $65.99, the Oct 1 low, and $64.16, the Sep 10 low and a key support. For bulls, a clear reversal would 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. Initial resistance is at $72.34, the Oct 24 high.
- The trend condition in Gold is unchanged and bulls remain in the driver’s seat. The latest climb has resulted in a breach of $2685.6, the Sep 26 high, confirming a resumption of the primary uptrend and maintaining the price sequence of higher highs and higher lows. Sights are on the $2800.0 handle next as the yellow metal appreciates. Firm support is $2694.6, the 20-day EMA. A clear break of this EMA would highlight a short-term top.
| Date | GMT/Local | Impact | Country | Event |
| 30/10/2024 | 1100/0700 | ** |  US | MBA Weekly Applications Index |
| 30/10/2024 | - |  GB | UK Budget | |
| 30/10/2024 | 1215/0815 | *** | US | ADP Employment Report |
| 30/10/2024 | 1230/0830 | *** | US | GDP |
| 30/10/2024 | 1230/0830 | ** | US | Advance Trade, Advance Business Inventories |
| 30/10/2024 | 1230/0830 | *** | US | Treasury Quarterly Refunding |
| 30/10/2024 | 1300/1400 | *** |  DE | HICP (p) |
| 30/10/2024 | 1400/1000 | ** | US | NAR Pending Home Sales |
| 30/10/2024 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 30/10/2024 | 1500/1600 |  EU | ECB's Schnabel speech at SAFE-CEPR conference | |
| 30/10/2024 | 1800/1400 | US | Fed Beige Book | |
| 30/10/2024 | 2015/1615 |  CA | BOC Governor Macklem at Senate banking committee | |
| 31/10/2024 | 2350/0850 | * |  JP | Retail Sales (p) |
| 31/10/2024 | 2350/0850 | ** | JP | Industrial Production |
| 31/10/2024 | 0030/1130 | *** |  AU | Retail trade quarterly |
| 31/10/2024 | 0030/1130 | ** | AU | Retail Trade |
| 31/10/2024 | 0030/1130 | ** | AU | Trade price indexes |
| 31/10/2024 | 0030/1130 | * | AU | Building Approvals |
| 31/10/2024 | 0130/0930 | *** |  CN | CFLP Manufacturing PMI |
| 31/10/2024 | 0130/0930 | ** | CN | CFLP Non-Manufacturing PMI |
| 31/10/2024 | 0300/1200 | *** | JP | BOJ Policy Rate Announcement |
| 31/10/2024 | 0700/0800 | ** | DE | Retail Sales |
| 31/10/2024 | 0700/0800 | ** | DE | Import/Export Prices |
| 31/10/2024 | 0745/0845 | *** |  FR | HICP (p) |
| 31/10/2024 | 0745/0845 | ** | FR | PPI |
| 31/10/2024 | 1000/1100 | *** | EU | HICP (p) |
| 31/10/2024 | 1000/1100 | ** | EU | Unemployment |
| 31/10/2024 | 1000/1100 | *** |  IT | HICP (p) |
| 31/10/2024 | 1000/1000 | GB | BOE's Breeden speech on emerging technologies | |
| 31/10/2024 | 1230/0830 | *** | US | Jobless Claims |
| 31/10/2024 | 1230/0830 | *** | US | Personal Income and Consumption |
| 31/10/2024 | 1230/0830 | *** | US | Employment Cost Index |
| 31/10/2024 | 1230/0830 | *** | CA | Gross Domestic Product by Industry |
| 31/10/2024 | 1230/0830 | * | CA | Payroll employment |
| 31/10/2024 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 31/10/2024 | 1230/0830 | *** | CA | Gross Domestic Product by Industry |
| 31/10/2024 | 1345/0945 | *** | US | MNI Chicago PMI |
| 31/10/2024 | 1430/1030 | ** | US | Natural Gas Stocks |
| 31/10/2024 | 1530/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 31/10/2024 | 1530/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 01/11/2024 | 2200/0900 | ** | AU | S&P Global Manufacturing PMI (f) |