Highlights:
- China's fiscal package could reach CNY10trl, with details as soon as next week
- Treasury curve modestly steeper, with earnings schedule busy
- AUD/USD underperforms, hitting new pullback low
US TSYS: Modestly Cheaper And Steeper Pre Labor Data & Earnings
- Treasuries have lifted off lows but still consolidate yesterday’s sell-off. The 10Y yield earlier exceeded 4.30% for the first time since July with 4.312% but is currently back at 4.294%.
- Next week’s US presidential election is eyed and a Reuters report on fresh China fiscal stimulus could be supporting the net selling pressure.
- Cash yields are 0.2-1.5bp higher on the day which sees 2s10s lift further to 15.9bps (+1.2bp) although it remains within recent ranges.
- TYZ4 sits at 110-19 (- 03+) off a latest low of 110-15+ that further builds bearish momentum, amidst reasonable cumulative volumes of 325k. It came close to support at 110-13 (61.8% retrace of Apr – Sep bull cycle, cont.). Beyond that, 4.35% in cash yields equates to 110.08 after which lies the round 110-00.
- Today sees focus on labor data ahead of Friday’s payrolls report along with the heaviest reporting day of busy week for earnings, including Alphabet and other large names including Visa (MNI earnings calendar).
- Data: Adv goods trade bal Sep (0830ET), Wholesale/retail inventories Sep P/Sep (0830ET), FHFA and S&P CoreLogic house prices Aug (0900ET), JOLTS report Sep (1000ET), Conf Board consumer survey Oct (1000ET), Dallas Fed services Oct (1030ET)
- Note/bond issuance: US Tsy $30B 2Y FRN & $44B 7Y Note auctions (1300ET)
- Bill issuance: US Tsy $48B 52W Bill, $80B 42D CMB auctions (1130ET)
STIR: A Little Over 100bp Of Fed Cuts To June Ahead Of Labor Data
- Fed Funds implied rates for meetings out to mid-2025 are little changed overnight.
- The recent steepening bias is intact, with the Dec implied rate at the mid-to-higher end of the range over the past two weeks but the Jun’25 rate only slightly below recent highs.
- Cumulative cuts from 4.83% effective: 24bp Nov, 42bp Dec, 59bp Jan and 104bp June.
- Today’s data highlights are centered around labor releases with the JOLTS report for September and the labor differential within the Conference Board consumer survey after further deterioration back in Sept.
- The FOMC is in media blackout before the Nov 6-7 meeting.
CHINA: Fresh Fiscal Package Could Reach CNY 10trl, Larger Under Trump
Outside of the UK Budget and US election, much market focus remains on China's NPC Standing Committee meeting due from Nov 4 - 8 next week and worth noting that while headlines at the time suggested the focus would be on the appointment and removal of officials, further details on stimulus or a fiscal package could be forthcoming - particularly as Chinese allows the NPCSC to delay the disclosure of agenda items until they've been formally approved.
- This last Reuters exclusive goes into more detail on what's being considered: a fresh fiscal package worth over CNY 10trl, with China planning to raise debt via special treasury and local government bonds over the coming few years. The package would include proceeds to address debt risk (CNY 6trl) and for acquiring local land (CNY 4trl). The package could be larger in the event of a Trump victory, according to the report.
In terms of timings for a potential fiscal announcement from China - an announcement is unlikely before November 8th (the final day of the NPC meeting), and that also allows the NPC to gauge the election results in the US to make any tweaks to the statement.
- Local analysts in the NPC Observer note that a likely time for an announcement could be on CCTV's Xinwen Lianbo program at 7pm local time (1100GMT / 0600ET), with full details of a potential package to follow later that evening.
EUROPE ISSUANCE UPDATE:
Slovakia syndication: Revised guidance
- MNI expects E1bln of the new Nov-31 SlovGB. Books in excess of E5bln, revised guidance MS+80bps Area (initial guidance was MS+90 Area).
UK auction results
- GBP4bln of the 4.125% Jul-29 Gilt. Avg yield 4.148% (bid-to-cover 3.05x, tail 0.8bp).
Germany auction results
- E4bln (E3.291bln allotted) of the 2.50% Oct-29 Bobl. Avg yield 2.13% (bid-to-offer 1.74x; bid-to-cover 2.12x).
MNI UK Budget Preview: Is this just the beginning?
- Our overall expectation ahead of the Budget is that the impact on MPC policy will likely be more subdued than the market currently fears, given that we expect infrastructure spending to be ramped up more gradually.
- We look at he changes to fiscal rules and what they mean as well as the expected measures that will be announced.
- Furthermore we look at the implications for the financing situation and the gilt remit and potential market implications.
- On the political risk side, this will be the first major test of Labour's economic stance. We look at the wider political implications of the Budget.
For the full document see the PDF: UK_Budget_Preview_2024_10.pdf
MNI Eurozone Inflation Preview: October 2024 - Core Is Central
EXECUTIVE SUMMARY
- ECB officials have expressed increased confidence in the inflation outlook in recent weeks, underscored by the slight wording adjustments made in the October policy statement. Inflation is now expected to return sustainably to target “in the course of next year”, rather than the second half of 2025.
- This confidence was also visible at last week’s IMF/World Bank annual meetings, where several ECB policymakers appeared encouraged by September’s lower-than-expected figures and some dovish members noted that inflation risks were likely skewed to the downside.
- In October, headline inflation is expected to tick up to 1.9% Y/Y (vs 1.7% prior) on energy base effects. However, this won’t distract markets from developments in the core measure, which remains the focus amongst policymakers. Analysts expect some slight moderation again following September’s downside surprise, to a rounded 2.6% (from 2.7% prior).
- October inflation (and next month’s November print) will be a crucial input for the ECB’s December macroeconomic projections. These forecasts will be key in determining whether the bank can push ahead with an outsized 50bp cut in December, and/or make changes to its guidance to keep policy restrictive for as long as necessary.
PDF Analysis Here: October2024EZCPIPreview.pdf
FOREX: AUD Underperformance Results in New Pullback Low
- AUD is underperforming broader G10, helping AUD/USD plumb a new pullback low of 0.6559 in Asia-Pac trade. This puts the pair again at the lowest level since early August, although the price has stabilised ahead of the NY crossover.
- Headline risk has been few and far between so far Tuesday, with attention fixed on near-term risk events in the UK (Wednesday's Budget) and the US (Friday's payrolls, next week's election), however speculation around a Chinese fiscal package remains a sentiment driver. Reports out this morning suggest a package of CNY 10trl is being prepared - and would include proceeds to address debt risk (CNY 6trl) and for acquiring local land (CNY 4trl). The package could be larger in the event of a Trump victory, according to the report.
- EUR trades well for a second session, with EUR/USD testing the weekly high in early Tuesday trade. Nonetheless, the pair remains well within range of recent lows, with slippage through 1.0800 likely to again switch focus to 1.0761 and below.
- Datapoints remain few and far between Tuesday, with trade balance stats for September and the October consumer confidence print the only releases of note. The Fed remain inside their pre-decision media blackout period, leaving the only speakers of note today as BoC's Macklem and Rogers - who address lawmakers but are likely to stick to their communique from last week's rate decision, at which the Bank cut rates by 50bps.
OPTIONS: Expiries for Oct29 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0745-50(E740mln), $1.0800(E2.4bln), $1.0815-20(E618mln), $1.0850-60(E723mln)
- USD/JPY: Y151.00-15($2.3bln), Y152.80-00($783mln)
- USD/CAD: C$1.3800($1.8bln), C$1.3820($1.1bln)
COMMODITIES: Monday's Gap Lower Reinforces Bearish Theme in WTI Futures
- A bearish theme in WTI futures remains intact and Monday’s gap 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 break of $2685.6, the Sep 26 high, confirming a resumption of the primary uptrend. Sights are on $2767.1 next, a Fibonacci projection point, ahead of the $2800.0 handle. Firm support is $2686.2, the 20-day EMA. A clear break of this EMA would signal scope for a deeper retracement.
EQUITIES: Eurostoxx 50 Futures Within Recent Ranges, Bear Threat Still Present
- Eurostoxx 50 futures continue to trade within the recent range. For now, a bear threat remains present. The contract traded sharply lower on Oct 15 and pierced the 50-day EMA, at 4949.55. 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. Short-term weakness is considered corrective and the uptrend remains intact. Price has recently traded through support at the 20-day EMA, at 5837.02, but is - for now - trading above this average once again. A clear bearish break of the EMA would open 5757.807, the 50-day EMA. For bulls, a stronger resumption of gains would refocus attention on 5961.00, a Fibonacci projection.
| Date | GMT/Local | Impact | Country | Event |
| 29/10/2024 | 0001/0001 | * |  GB | BRC Monthly Shop Price Index |
| 29/10/2024 | 0700/0800 | * |  DE | GFK Consumer Climate |
| 29/10/2024 | 0700/0800 | ** |  SE | Retail Sales |
| 29/10/2024 | 0700/0800 | SE | Flash GDP | |
| 29/10/2024 | 0930/0930 | ** | GB | BOE M4 |
| 29/10/2024 | 0930/0930 | ** | GB | BOE Lending to Individuals |
| 29/10/2024 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 29/10/2024 | 1255/0855 | ** |  US | Redbook Retail Sales Index |
| 29/10/2024 | 1300/0900 | ** | US | S&P Case-Shiller Home Price Index |
| 29/10/2024 | 1300/0900 | ** | US | FHFA Home Price Index |
| 29/10/2024 | 1300/0900 | ** | US | FHFA Home Price Index |
| 29/10/2024 | 1400/1000 | *** | US | Conference Board Consumer Confidence |
| 29/10/2024 | 1400/1000 | ** | US | housing vacancies |
| 29/10/2024 | 1400/1000 | *** | US | JOLTS jobs opening level |
| 29/10/2024 | 1400/1000 | *** | US | JOLTS quits Rate |
| 29/10/2024 | 1430/1030 | ** | US | Dallas Fed Services Survey |
| 29/10/2024 | 1530/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 29/10/2024 | 1530/1130 | ** | US | US Treasury Auction Result for 52 Week Bill |
| 29/10/2024 | 1700/1300 | ** | US | US Treasury Auction Result for 7 Year Note |
| 29/10/2024 | 1700/1300 | ** | US | US Treasury Auction Result for 2 Year Floating Rate Note |
| 29/10/2024 | 1930/1530 |  CA | BOC Governor Macklem at House finance committee | |
| 30/10/2024 | - |  JP | Bank of Japan Meeting | |
| 30/10/2024 | 0030/1130 | *** |  AU | CPI inflation |
| 30/10/2024 | 0030/1130 | *** | AU | CPI Inflation Monthly |
| 30/10/2024 | 0600/1400 | ** |  CN | MNI China Money Market Index (MMI) |
| 30/10/2024 | 0630/0730 | ** |  FR | Consumer Spending |
| 30/10/2024 | 0630/0730 | *** | FR | GDP (p) |
| 30/10/2024 | 0700/0800 | *** | DE | GDP (p) |
| 30/10/2024 | 0800/0900 | *** |  ES | HICP (p) |
| 30/10/2024 | 0800/0900 | *** | ES | GDP (p) |
| 30/10/2024 | 0800/0900 | ** |  CH | KOF Economic Barometer |
| 30/10/2024 | 0800/0900 | ** | SE | Economic Tendency Indicator |
| 30/10/2024 | 0855/0955 | ** | DE | Unemployment |
| 30/10/2024 | 0900/1000 | *** |  IT | GDP (p) |
| 30/10/2024 | 0900/1000 | ** | IT | PPI |
| 30/10/2024 | 0900/1000 | *** | DE | North Rhine Westphalia CPI |
| 30/10/2024 | 0900/1000 | *** | DE | Bavaria CPI |
| 30/10/2024 | 1000/1100 | *** |  EU | EMU Preliminary Flash GDP Q/Q |
| 30/10/2024 | 1000/1100 | *** | EU | EMU Preliminary Flash GDP Y/Y |
| 30/10/2024 | 1000/1100 | ** | EU | EZ Economic Sentiment Indicator |
| 30/10/2024 | 1000/1100 | * | EU | Consumer Confidence, Industrial Sentiment |
| 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 |
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