- Digesting German Orders and Fed Fischer/Lacker comments, awaiting ECB
September 'minutes', US jobless claims and layoffs; France and UK to
sell debt; oil prices and Deutsche Bank may again move centre stage
as markets await US labour report tomorrow
- German Factory Orders: finally starting to echo pick-up in Ifo
sector sub-indices
- US Jobless Claims: seen below 260K and close to 43-yr low for third week
- Bonds/Credit: 'riskier' credit still very impervious to upward drift in
govt bond yields
- Charts: US, UK & German 5/30 yr yield spread, JPM EMBI spread, US HY Bond
ETF, WTI Oil future, USD/JPY
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** EVENTS PREVIEW **
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Today's data schedule is unlikely to offer too many distractions to financial markets, with German Factory Orders and US jobless claims the only real potential market movers. The ECB's account of its September policy meeting would normally be at best "mentioned in dispatches". But in the wake of the stories (since denied) about the ECB looking at tapering it's QE programme, there will be plenty scouring, probably forlornly, for any hints or clues. On the govt bond auction front, France with a mix of 10 to 50-yr OATs, and the UK re-opening of its new 2047 Gilt top the schedule, with the ECB taper story and firmer US data having helped to fashion a concession for both. German Factory Orders at 1.0% m/m following a modestly upwardly revised 0.3% in July are starting to reflect the pick-up seen in the Manufacturing & Exporter indices of the Ifo, with domestic (2.6% m/m) and Eurozone (4.1% m/m) orders offsetting a drop in non-Eurozone Orders (-2.8% m/m). As the pre-US Payrolls vigil sets in, weekly jobless claims are expected to remain below 260k at 256k for a third week (Payrolls survey week saw a 251K, the lowest since April's 43-year low of 248K), and as such continue to underline the strength of labour demand; Challenger Grey Layoffs data are also due. AS the assortment of attached charts highlight, while there is some upward pressure on yields, there has also been divergence between the US and Bund 5/30 yr spreads, with the steepening of the Bund curve, rather more logical than the modest flattening of the US Treasury curve. The latter being less logical in so far as US 30-yr yields at 2.43% look woefully inadequate, with CPI at 2.3% y/y and oil / energy product prices hurtling higher, and per se implying further upward pressure on headline inflation. Risk assets (as here represented by the JPM Emerging Market Bond Index spread and the US iShares HY Bond ETF would also appear to be still in 'TINA' territory, rather than mindful of the risks to the underlying govt bond yields. For the oil market, there appears to be some chatter doing the rounds about a 'special meeting of OPEC and non-OPEC producing countries in Istanbul from 9 to 13 October. This is in fact neither 'special' nor 'extraordinary', but rather a regular and long scheduled meeting of the World Energy Council, which will of course give both sides an opportunity to discuss how to flesh out the vague OPEC agreement on capping production - details for those that are interested here:
http://www.wec2016istanbul.org.tr/ . Deutsche Bank will likely be back in focus, as stories do the rounds that the German govt is holding 'discreet talks' with the US about securing a swift settlement of its toxic mortgage bonds fine.
from Marc Ostwald
