The Market Today
Markets Upbeat Ahead of Exhaustive Weekly Economic Calendar
by Craig Dismuke, Dudley Carter
CORONAVIRUS UPDATE (VS Coronavirus Chartbook – PDF)
Regional Fed Index, Fedspeak Kick off Quiet Start to Busy Week: This week’s economic calendar is packed with data including goods trade data, consumer confidence, personal income and spending, auto sales, construction spending, manufacturing data, PCE inflation, and the September jobs data. However, today brings the one relatively quiet day. At 9:30 a.m. CT, the Dallas Fed Manufacturing Index is expected to inch up from +8.0 to +9.5. Cleveland Bank President Mester is scheduled to speak via a webinar on economic equity at 1:00 p.m. Also worth watching, ECB President Lagarde will be testifying before the European Parliament at 8:45 a.m. and is expected to echo last week’s comments from U.S. Fed speakers: the acute need for additional fiscal stimulus.
Markets Upbeat Ahead of Overwhelming Weekly Economic Calendar: Global shares and sovereign yields have moved higher overnight with sentiment improving to start a week heavily populated with important economic reports. Despite Chinese equities edging lower, most other markets gained in Asia to push the MSCI Asia Pacific index up 0.7%. The upbeat tone has strengthened further in Europe as banks led widespread gains to boost the Stoxx Europe 600 by more than 2%. Shares of HSBC were trekking their strongest daily gain in over a decade after a Chinese insurance company announced it had added to its investment in the U.K. lender. The banking sector as a whole was up by more than 3%. In the U.S., airliners’ shares were outpacing Amazon in pre-market trading, pointing to some possible rotation into names and sectors that have lagged behind in recent weeks.
Treasury Yields Inch Higher Amid Improved Bid for Risk Assets: After notching a fourth weekly decline last week for the first time in over a year (more below), futures on the S&P 500 were 1.5% higher ahead of the open. The signal from stronger global equities was echoed by other assets, as oil prices rose with Treasury yields and the Dollar gave back some of its recent rise. Following similarly-sized moves across Europe, the Treasury curve had moved modestly higher and steeper just before 7:30 a.m. CT. The 2-year yield rose 0.2 bps to 0.13% while the 10-year yield added 1.3 bps to 0.67%.
ICYMI – September 25, 2020 Weekly Market Recap: For a second week in a row, Treasury yields traversed an unusually tight range despite more equity volatility, new social restrictions in Europe, and mixed U.S. economic data. Daily infections in the U.K. and France hit records and officials from both countries announced new social restrictions. The Eurozone’s services PMI contracted unexpectedly in September and the euro hit a two-month low against the Dollar. In the U.S., housing’s exceptional recovery continued as sales of new and existing homes beat expectations with their strongest months since 2006. Business investment also exceeded estimates in August and capital goods orders and shipments have now fully recovered from their pandemic drops. However, PMI data showed services activity slowed and initial jobless claims rose unexpectedly. Stimulus negotiations remain stalled as a new proposal from House Democrats provided for significantly more aid than Republicans and the White House have said they could support. Yet Fed officials continued to implore lawmakers for more aid as part of a deluge of Fedspeak that also included individual interpretations of the new forward guidance, with a couple of officials saying that inflation of 2.5% would be acceptable as “moderately above 2 percent.” For the week, the 10-year yield slipped 3.9 bps to 0.65% after trading within a 4.4-bp range, the narrowest trading range since 1998. The S&P 500 posted a fourth consecutive weekly decline for the first time since August 2019. Click here to view the full recap.