ITALY DATA: Manufacturing PMI Signals Weak Start For Industry In Q4
The Italian manufacturing PMI reached its weakest since June at 46.9 in October, below the 48.5 consensus and last month’s 48.3. This signals a weak start to Q4 industrial activity, after the sector dragged on growth in the third quarter. It also underscores Spain as the only major driver of economic growth across the Eurozone.
Key notes from the release:
- “The downturn was in part caused by a rapid and accelerated drop in export sales. Some panellists cited reduced inflows of new business from the US, the Middle East and Europe in particular. Others blamed weakness on the international autos market”.
- “The challenging market environment influenced firms' decisions on jobs”.
- “There was a similarly sharp decrease in stocks of purchases signalled”…“the rate of depletion was not only substantial, but also one of the fastest seen in the survey's history”.
- “Manufacturing firms in Italy signalled a decrease in their purchasing costs”…” the reduction was only fractional”.
- “Firms passed some of the relieved cost pressures on to customers in the form of lower output charges”…” Firms cited attempts to encourage sales through promotional price setting”
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JGB TECHS: (Z4) Bullish Theme Fades
- RES 3: 149.55 - High Mar 22 (cont)
- RES 2: 147.74 - High Jan 15 and bull trigger (cont)
- RES 1: 146.53 - High Aug 6
- PRICE: 144.32 @ 16:23 BST Oct 04
- SUP 1: 143.57 - Jul 17 high
- SUP 2: 142.23 - Low Jul 02
- SUP 3: 140.21 - 1.236 proj of Mar 22 - Nov 1 ‘23 - Jan 15 price swing
The bullish outlook for JGBs was dealt a further blow Friday on the stronger-than-expected US jobs print. As a result, JGBs slipped sharply to pullback lows of 144.300 - however the low is still clear of next support at 143.57. Additionally, moving average studies on the continuation chart are in a bull-mode position, highlighting a clear uptrend. A continuation higher would open 146.53, the Aug 6 high(cont) and a bull trigger.
USDCAD TECHS: Corrective Phase
- RES 4: 1.3739 High Aug 15
- RES 3: 1.3693 High Aug 19
- RES 2: 1.3647 High Sep 19 and key resistance
- RES 1: 1.3584/91 50-day EMA / High Oct 4
- PRICE: 1.3579 @ 16:39 BST Oct 4
- SUP 1: 1.3473/3420 Low Oct 2 / Low Sep 25 and the bear trigger
- SUP 2: 1.3413 Low Feb 9
- SUP 3: 1.3358 76.4% retracement of the Dec 27 ‘23 - Aug 5 bull run
- SUP 4: 1.3288 Low Jan 5
The trend condition in USDCAD remains bearish and the latest recovery appears to be a correction - for now. The strong Sep 24 sell-off reinforced a bearish theme. The pair breached support at 1.3441, the Aug 28 low, confirming a resumption of the downtrend that started Aug 5. This paves the way for an extension towards 1.3358, a Fibonacci retracement. Resistance to watch is 1.3584, 50-day EMA - a level pierced on Friday. A break would expose 1.3647, Sep 19 high.
US TSYS: Tsys Broadly Lower, Curves Flatter After Strong September Job Gains
- Treasuries gapped lower following this morning's stronger than expected jobs data for September, futures gradually extending session lows since midmorning while curves bear flatten: 2s10s -8.542 at 5.295 -- the lowest since mid-September.
- Payrolls growth was far stronger than expected in September at 254k (cons 150k) for a 104k surprise, nearly entirely driven by the 98k surprise for private payrolls (223k vs cons 125k).
- The status flows within the household survey echo the strong headline figures that saw the unemployment rate surprisingly fall from 4.22% to 4.05%. The outright shift from employed to unemployed (-215k) extended the improvement seen in Aug (-47k) after what had been a sharp 292k increase in July that drove the surprise lurch in the unemployment rate to 4.25%.
- Markets have been swift to price out a 50bp November rate cut after September's employment report came in much stronger than expected - in addition to revisions that recast the summer's weak hiring in a much more positive light. Indeed, November implied pricing has even dipped a little below 25bp, suggesting potential for a rate hold.
- Meanwhile, focus turns to next week's CPI and PPI inflation measures on Thursday and Friday respectively, prefaced by Wednesday's September FOMC minutes release.
