EU CONSUMER CYCLICALS: CONSUMER CYCLICALS: Burberry; Moody's downgrade (x3)
(Baa3 Neg now/NR)
A edit to what we said on Friday re. liquidity - we do see positive net cash flows in FY25 based on current ~guidance (which will include last years FY dividend paid in 1H). Support coming from a potential 2H WC swing on a guided to inventory clean-up (which has dragged the gross margin guidance down). If so it would add to the £440m cash on hand it had at end of FY24.
Above are simply short-term credit considerations - may be relevant if £25 sellers emerge (at UKT+90). Thoughts on 30s unch including wide on RV but caution till we see at least Q3 trading update (24 Jan). We said cost to wait is 40bps in carry over the benchmark or said alternatively ~9bps of protection for spread moves on the day.
Reported buyers did emerge on Friday, holding +11 at UKT+236/6.5%.
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US: Vice President Harris Rally In Texas Underway Shortly
Vice President Kamala Harris is shortly due to hold a high-profile rally in Huston, Texas, designed to drive turnout amongst women by linking former Presdient Donald Trump to restrictive abortion laws enacted by Texas since the Supreme Court decision to role back Roe vs Wade in 2022. LIVESTREAM Harris will be joined on stage by pop star Beyonce and country singer Willie Nelson.
- A senior Harris campaign official said in an interview: “Texas is the stage, and the audience is the battlegrounds. It definitely arrests people's attention in a way that is hard to do by just going back to another battleground at this point in the cycle. This is our strategic way to break through the news.”
- Politico notes: “The message they want folks to hear: (1) Abortion rights are on the ballot in November, (2) Texas’ abortion ban is a result of Trump’s court appointments and (3) if he returns to the White House, those restrictions are at risk of spreading to other states.”
- The Harris campaign is hoping the rally can drive turnout, especially among non-college-educated White women. If the strategy is successful, Democrats are also targeting a down-ballot effect that can boost Rep Colin Allred (D) in his bid to unseat Senator Ted Cruz (R-TX). Statewide races in Texas are always a heavy lift for Democrats but recent polling shows a tight race that may provide the only pathway for Democrats to retain control of the Senate.
AUSSIE 10-YEAR TECHS: (Z4) Through First Support
- RES 3: 96.975 - High Mar 14
- RES 2: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- PRICE: 95.570 @ 15:49 BST Oct 25
- SUP 1: 95.490 - Low Oct 23
- SUP 2: 95.430 - Low Apr 26 (cont)
- SUP 3: 94.722 - Low Jul 2
Aussie 10-yr futures remain weak on the back of stellar domestic jobs numbers, prompting prices to come under further pressure. This counters the recent bullish set-up. Prices fell through 95.850 Friday, narrowing the gap with the next key support at the Apr 26 low of 95.430. Any recovery and clear break higher would confirm a resumption of the uptrend and pave the way for an extension towards 96.207, a Fibonacci retracement.
AUDUSD TECHS: Bearish Structure
- RES 4: 0.6942 High Sep 30 and the bull trigger
- RES 3: 0.6852/6889 High Oct 4 / 3
- RES 2: 0.6762 High Oct 9
- RES 1: 0.6728 50-day EMA
- PRICE: 0.6639 @ 16:01 BST Oct 25
- SUP 1: 0.6622/14 Low Sep 11 and key support / Low Oct 23
- SUP 2: 0.6576 61.8% retracement of the Aug 5 - Sep 30 bull leg
- SUP 3: 0.6508 Low Aug 8
- SUP 4: 0.6490 76.4% retracement of the Aug 5 - Sep 30 bull leg
A bear cycle in AUDUSD remains intact and price is trading just above this week’s low. The recent breach of both the 20- and 50-day EMAs, exposed 0.6622, the Sep 11 low and a key support. This support has been pierced. A clear break of it would strengthen a bearish theme and open 0.6576, a Fibonacci retracement. Key resistance is at 0.6942, the Sep 30 high. Initial firm resistance to watch is 0.6728, the 50-day EMA.
