EU Close

Jan-26 17:45

€IG cash pointed to a strong finish this week, Sartorius (on earnings) & Tapestry among the best performers. Today's rally adds to a -4/-6bp move WTD for €IG/HY cash. iTraxx closed -2.2/-14.2 over the week lagging headline cash - a theme we've seen this yr & could be a tailwind for basis to move higher again.

Supply expectations remain muted (rolling earnings blackouts continue) & are ~unch from this week at ~€18b & (for $IG) $20-$25b. We've seen noticeable slowdown in cash compression across both € & $ - there has been a pick up in supply in both regions ($HY saw its busiest day in 3-months with $3.5b on Thursday) & that as the driver is echoed in risk sentiment that's otherwise looked to have held up - $ & €IG still managed to compress 1-2bps & some stronger compression in BB/B spreads - $CCC only one wider WTD & continuing its YTD underperformance.

€IG eqv's finished +0.6% today - broad based gains led by LVMH (+12.9%) & peers. Utilities only sector in the red after RWE (-6%) issued weak FY24 earnings guidance on falling energy prices in Euro wholesale markets - its dragged on index heavyweights Engie & Enel as well. The equity basket ends the week over 2% higher and closer to its early Jan highs - reversing some of the decoupling in spreads vs. equities we commented on last week. Similar reversal up in our $IG basket & as we noted FY24 EPS growth (for major equity indices) are unch to higher since earnings began. That'll optimism will be tested again next week with a heavier earnings schedule.

Big week ahead for macro with Fed & BOE meetings - split in front-end pricing between the two has driven credit yield divergence. £ spreads playing catch up this week though still lags $/€ YTD moves. Treasury refunding announcement last time caused some rates vol & it begins with borrowing estimates on Monday before the refunding announcement itself on Wednesday. Its labour market heavy in data for US - Fed will have ADP employment for Jan & ECI for Q4 in hand - our Economist flags ECI is cleanest measure for wages & has been directly referenced by Powell - though it lags (in timeliness) the AHE from payrolls that we get post-Fed on Friday.

Focus in Euro on rolling Jan inflation (Tue-Thur) but we also get first glance at Q4 GDP & in UK its BOE meeting focused including the voter breakdown, statement, minutes & new forecasts from MPR.

Historical bullets

US TSYS: US TSY 1Y-10M FRN AUCTION: NON-COMP BIDS $26 MLN FROM $26.000 BLN TOTAL

Dec-27 17:45
  • US TSY 1Y-10M FRN AUCTION: NON-COMP BIDS $26 MLN FROM $26.000 BLN TOTAL

OPTIONS: Larger FX Option Pipeline

Dec-27 17:40
  • EUR/USD: Dec29 $1.1050-55(E983mln)
  • USD/CAD: Jan02 C$1.3420-40($1.1bln)

US STOCKS: Equities Roundup: Real Estate, Consumer Discretionary Sectors Leading

Dec-27 17:30
  • Stocks trading mildly higher at midday, S&P eminis near last Wednesday's high (4830.75) and led by Real Estate and Consumer Discretionary sectors. At the moment: DJIA trades up 75.19 points (0.2%) at 37565, S&P E-Mini future up 1 point (0.02%) at 4826, Nasdaq up 10.9 points (0.1%) at 15071.66.
  • Leading gainers: Real Estate Investment Trusts (REITs), particularly residential supported property shares: UDR +0.84%, Camden Property Trust +0.75%, Equity Residential +0.73%. Meanwhile, auto and parts makers supported the Consumer Discretionary: Tesla +2.31%, Aptiv +0.38%.
  • Laggers: Energy and Utility sectors underperformed in the first half, equipment and services shares pared gains from the prior session: Haliburton -0.81%, Schlumberger -0.53%, , Baker Hughes -0.30%. Independent energy providers weighed on the latter: Xcel Energy -1.04%, Dominion -0.74%, AES Corp -0.52%.
  • Technicals: A bullish theme in S&P e-minis remains intact and yesterday’s fresh trend high reinforces current conditions. The move higher confirms once again a resumption of the uptrend that started Oct 27. The contract has also recently cleared resistance at 4738.50, the Jul 27 high, reinforcing current positive trend conditions. Sights are on 4854.75 next, a Fibonacci projection. On the downside, initial firm support lies at 4715.00, the 20-day EMA.