MNI US MARKETS ANALYSIS - Further Weakness in Tech Seen at US Open

US TSYS SUMMARY: Treasuries Stabilise After Further Sell-Off Overnight

• Cash Tsy yields have recently stabilised after rising through Asian hours, currently up 3-3.5bps across the curve.
• 2Y yields are +3.0bps at 0.856%, 5Y +3.3bps at 1.462%, 10Y +3.0bps at 1.735% and 30Y +3.4bps at 2.129%.
• The 2Y is just off post-pandemic highs from earlier in the session whilst the 10Y is not far off the last year's high of 1.774% (Mar 30).
• TYH2 is down 8 ticks at 128-19 and off a session low of 128-16, having earlier broken a key support level of 128-22+ on solid volumes. New support is seen at 128-05 (1.618 proj of the Dec 20-29-31 price swing) followed by the psychological 128-00, whilst resistance is seen at 129-19 (Jan 4 high).
• Fedspeak: Bullard (2022 voter, 1315ET) and Daly (non-voter, 1130ET).
• Data: ISM services and especially prices paid is the main release over finalised durable goods for Nov and weekly jobless claims, but with greater focus on tomorrow’s payrolls.
• NY Fed buy-op: TIPS 7.5Y-30Y, appr $925M (1120ET).
• Issuance: $50B 4W, $40B 8W bill auctions (1130ET).

EGB/GILT SUMMARY - Broad Selling

European government bonds have traded broadly weaker alongside fresh losses for equities on the bout of the tech sector rout.

• Gilts have sold off sharply with yields 3-5bp hihger on the day and the curve 2bp steeper.
• Bund yields are now up 2-3bp with the belly of the curve slightly underperforming.
• It is a similar story for OATs where the belly of the curve is leading the push lower.
• BTPs have underperformed core EGBs, particularly at the longer end. The curve has bear steepened with the 2s30s spread trading up 3bp.
• The German regional CPI data released through the morning have been broadly in line to a touch stronger in Y/Y terms. The national estimate will be published at 1300 GMT.
• Supply this morning came from France (LT OATs, EUR10.997bn).

EUROPE ISSUANCE UPDATE:

• E5.87bln 0% May-32 OAT, Avg yield 0.30% (Prev. 0.16%), Bid-to-cover 2.12x (Prev. 1.86x)
• E1.796bln 0.50% May-40 OAT, Avg yield 0.69% (Prev. 0.62%), Bid-to-cover 2.29x (Prev. 2.33x)
• E3.331bln 0.75% May-53 OAT, Avg yield 0.99% (Prev. 0.83%), Bid-to-cover 1.58x (Prev. 2.56x)

EUROZONE OPTION FLOW SUMMARY

Eurozone:
RXG2 174c, bought for 4 in 10k (short cover)
RXG2 168.5p, bought for 15/17 in 6k
RXG2 169/171^^ vs 2x 172.5 call, bought for 59.5 in 2k
RXH2 172/170/169p fly, sold at 77.5 in 2.4k

OEG2 132.5/133cs, bought for 33.5 down to 32 in 4k. (short cover)

US:
TYG2 128.25/127.50ps, bought for 13 in 2.5k

FOREX: Greenback Extending Gains Post-Minutes

• The greenback trades firmer this morning, extending the move post-FOMC minutes, which the markets interpreted hawkishly after the Fed strongly suggested the removal of stimulus could accelerate in the coming months. The USD's gains are more notable against growth proxy and commodity tied currencies, with AUD and NZD at the bottom-end of the G10 table.
• AUD/USD's downtick Thursday puts the pair short of a firm break above the 50-dma - and the rejection could mark the beginning of a bearish reversal that initially targets 0.7082 ahead of 0.6993. NZD is trading similarly poorly, but NZD/USD holds clear of key support at 0.6703 for now.
• Equity markets remain the focus for risk sentiment. There's been very little bounce for the in focus tech sector pre-market, with the NASDAQ future indicating another negative open on Wall Street later today. The e-mini S&P and DJIA futures are faring slightly better, but all still remain well shy of yesterday's best levels.
• ISM Services Index takes focus going forward, with markets on watch for the prices subcomponent after the manufacturing ISM data earlier in the week dropped sharply. Final German CPI numbers also cross as well as weekly jobless claims. Fed's Daly and Bullard make up the speaker slate.

OPTIONS: Expiries for Jan06 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1210-25(E2.1bln), $1.1265-75(E1.9bln), $1.1300(E1.4bln), $1.1330-50(E1.0bln), $1.1425(E598mln)
• USD/JPY: Y113.45-55($1.8bln), Y114.75-00($1.3bln), Y115.50-65($1.1bln)
• AUD/USD: $0.7200-20(A$639mln)
• USD/CAD: C$1.2780-90($796mln)
• USD/CNY: Cny6.40($651mln)

Price Signal Summary - Bonds Remain Under Pressure

• In the equity space, the S&P E-minis have failed to hold onto levels above 4800.00. Price has traded below the 20-day EMA and attention is on the 50-day EMA that intersects at 4645.32. This average is a key pivot chart point and a clear break of it would signal scope for a deeper pullback. EUROSTOXX 50 futures have reversed course as a risk-off mood weighs on price. From a technical standpoint, the pullback at this stage is considered corrective following a strong recovery between Dec 20 and yesterday’s high. Initial support is seen at 4249.50, the 20-day EMA. Price has recovered from today’s low, leaving the 20-day EMA intact.
• In FX, EURUSD is still consolidating and resistance at 1.1383/86, the Nov 30 and Dec 31 high, remains intact. Support to watch lies at 1.1222, Dec 15 low ahead of the bear trigger at 1.1185, Jul 1, 2020. GBPUSD remains in an uptrend and above its 50-day EMA at 1.3436 - the recent breach of this average reinforced bullish conditions. The focus is on 1.3607 next, the Nov 9 high. USDJPY cleared key resistance at 115.52 Tuesday, the Nov 24 high. The break resumes the uptrend, paving the way for a climb towards 117.08 next, 2.00 projection of Apr 23 - Jul 2 - Aug 4 price swing.
• On the commodity front, Monday’s high in Gold of $1831.9 is resistance and the channel base, at 1781.5, drawn from the Aug 9 low is support. Both these levels mark the short-term directional triggers. WTI futures remain in an uptrend and the contract has resumed its climb. Monday’s low of $74.27 represents the key short-term support. Scope is seen for a climb towards $79.40, Nov 16 high and the $80.00 handle.
• In the FI space, Bund futures remain bearish. Last week’s breach of support at 171.77, Nov 24 low strengthened the bearish case, paving the way for a move towards 169.34, the Oct 29 low and major support. Gilts remain in a downtrend. The contract has cleared support at 124.17, Nov 24 low. This opens 123.17 next, the 3.236 projection of the Dec 8 - 16 - 20 price swing. Treasuries have sold off sharply this week. Support at 128-22+, Nov 24 low has been cleared today and this opens 128-00 next.

EQUITIES: No Bounce for Tech, With NASDAQ Seen Gapping Lower at Open

• Equities are lower across Europe this morning, with the EuroStoxx50 off 1.2% at pixel time, extending the losses first seen on Wall Street yesterday that carried through Asia-Pac hours. Japan's Nikkei 225 finished with losses of over 2%, with the outsized tech and growth sectors undermining the headline index. The Nikkei 225's decline has prompted the index to reverse the 2022 gains, and slip through all three major moving averages.
• Across futures, the NASDAQ future has shown no signs of bouncing, and is indicating a drop of 0.4% at the open. The rally in US yields across the curve has persisted throughout European hours, trimming the attractiveness of growth-led tech stocks. Nonetheless, weakness is also seen across the Dow Transportation Index as well as real estate, underpinning the risk-off theme.

COMMODITIES: Precious Metals Dive After Fed Seen Hawkish

• WTI Crude up $0.41 or +0.53% at $78.1
• Natural Gas down $0.03 or -0.72% at $3.841
• Gold spot down $16.15 or -0.89% at $1800.17
• Copper down $6.7 or -1.52% at $433.6
• Silver down $0.59 or -2.59% at $22.2078
• Platinum down $12.3 or -1.25% at $972.58