LOOK AHEAD: Thursday Calendar: Weekly Claims, ISMs (F), Fed Speakers

Latest 10Y Block posted at 1228:03ET:

• -5,000 TYZ6 107-21, post time bid, appr DV01 $320,000
• +5,000 Eris SOFR 10Y Sep'21 at 94.74

• US equity indexes are holding weaker levels Monday, lower half of the day's range with the DJIA underperforming.
• Higher crude weighed (WTI +2.10 to $85.50) on risk sentiment as the US and Iran traded shots overnight, Pres Trump vowing to retaliate after Iran struck US forces in Jordan.
• While Communication Services, Industrials and Utilities sectors led declines in the first half, individual shares leading the retreat include: Edison International fell -23% and PG&E Corp -18.83% - both on amid the growing prospect of wildfire litigations, Howmet Aerospace Inc -8.13%, Aon PLC -7.14% and Take-Two Interactive Software -6.54%.
• Energy sector shares outperformed on the back of Monday's rebound in crude: SLB Ltd +2.5%, Kinder Morgan Inc +1.6%, while ExxonMobil Holdings Corp, Williams Cos, Halliburton Co and Chevron Corp gained 1.3-1.4%.

• China's manufacturing PMI edged up by 0.6-pts to 49.8 in August from July, remaining in contractionary territory for a second month, data from the NBS showed on Monday. The production and new orders sub-indices rose by 0.5 and 2.1-pts, to 50.4 and 50.6, respectively, rising above the breakeven 50 and indicating a rebound in output and market demand. However, the non-manufacturing PMI held at 49.0, leaving the composite PMI just 0.2-pts higher at 49.5. A selection of analyst views can be seen below:
  • ANZ said that the August PMI data point to continued weakness in the domestic economy, with both the manufacturing and non-manufacturing sector still in contractionary territory. The data do not indicate a significant improvement in activity, after GDP rose by an estimated 4.0% y/y in July, in their view. After the government adopted a countercyclical policy stance recently, ANZ believes more stimulus measures are likely to be announced in the near term.
  • Meanwhile, Commerzbank believes the data intensify pressure on Beijing to deliver more substantive policy support. With the fiscal rollout running behind schedule, they say that the case for pre-emptive monetary easing before year-end has strengthened.
  • Despite the increase in the manufacturing PMI, Goldman Sachs notes that the services and construction PMIs remained weak. Overall, they believe that the August NBS PMIs point to subdued activity across all three sectors. Manufacturing price indicators rose after four consecutive monthly declines, but the input price sub-index remained well above the output price sub-index, suggesting continued pressure on profit margins.
  • ING believes that the data suggest that while industrial activity might stabilise in August, there will be no major turnaround amid slowing growth momentum. Policy support announced over the past month appears focused on interest subsidies. As positive impacts may be relatively marginal, more measures are expected in the weeks ahead.
  • JP Morgan says that the uptick in the August PMI, especially the improvement in major production and demand components, supports a modest activity recovery in August. That said, August government bond issuance only had a limited pick-up, leaving Jan-Aug government bond issuance standing at 63% of the full-year target (vs. same period last year at 74%). This suggests that fiscal execution has yet to accelerate meaningfully, capping the upside for any significant rebound.