Morning Bid Americas: Treasuries gobbled up, oil braces for OPEC
28/11/2023 11:02
A look at the day ahead in U.S. and global markets from Mike
Dolan
Subdued world markets were relieved at the ease with which
Monday's sale of U.S. Treasuries was absorbed, but firmer oil
prices ahead of the week's postponed OPEC+ meeting cut across
any further decline in yields for now.
Benchmark Treasury yields US10YT=RR fell back more than 10
basis points to 4.37% after a total of $109 billion of 2 and
5-year notes hit the Street on Monday without much disruption.
Another weak U.S. housing readout, with sub-forecast new home
sales last month, perhaps flattered the post-auction moves.
Either way, it helped calm any jitters about another heavy
diary of debt sales - with some $39 billion of 7-year notes up
for grabs later on Tuesday.
November consumer confidence data will also be released as
investors assess the mood on the High Street and online from
"Black Friday" and "Cyber Monday" retail activity.
Preliminary estimates from Adobe Digital Insights indicated
that spending online on Monday was on track to reach a record
$12.4 billion as bargain hunters turned out in force. The
estimate, which does not account for inflation, predicts an
increase of more than 9% from the $11.3 billion that shoppers
spent during Cyber Monday last year.
That's likely a mixed blessing for Federal Reserve watchers
- the continued buoyancy of consumption but with increasing
price discrimination.
With investors confident the Fed will cut rates through the
second half of 2024 at least, top Fed policymakers are on the
stump again Tuesday.
Fed futures priced about 85bps of rate cuts through next
year, starting in June, though many major banks expect even
more.
Oil prices have been a critical factor in the inflation
battle of the past two years and although they retreated some
20% from highs of two months ago, traders are now watching
closely for signs of further output cuts at OPEC+'s postponed
meeting on Thursday - despite murmurs of rifts in the bloc.
Israeli forces and Hamas fighters appeared to be abiding by
a truce for a fifth morning on Tuesday, after a four-day
ceasefire was extended at the last minute for at least two days
to let more hostages go free.
Encouraged by the retreat in debt yields, softening economic
data and cooling geopolitical tensions, the dollar index .DXY
fell back to its lowest since August and is now down 3.8% this
month.
Stock indexes were pretty directionless, however. A modest
loss in the S&P500 .SPX on Monday added little new impetus and
futures were flat ahead of Tuesday's bell.
It was a mixed picture in Asia and Europe too, with Hong
Kong's Hang Seng .HSI underperforming with a loss of almost
1%.
There was fresh buzz about new equity sales though. Fashion
company Shein has confidentially filed to go public in the
United States, according to Reuters sources, in what is likely
to be one of the most valuable China-founded companies to list
in New York.
Elsewhere, St. Louis Fed researchers estimated the Federal
Reserve will need nearly four more years to cover a historic
operating loss and start sending profits again to the U.S.
Treasury again.
Key developments that should provide more direction to U.S.
markets later on Tuesday:
* U.S. Nov consumer confidence, Richmond Fed Nov business
survey, Dallas Fed Nov service sector survey, Sept house prices
* U.S. Treasury sells 7-year notes, 12-month bills
* Federal Reserve Board Governor Christopher Waller, Fed Board
Governor Michelle Bowman, Fed Vice Chair for Supervision Michael
Barr, Chicago Fed President Austan Goolsbee all speak; European
Central Bank chief Christine Lagarde and ECB chief economist
Philip Lane both speak; Bank of England Deputy Governor Dave
Ramsden and BoE policymaker Jonathan Haskel both speak
* U.S. corporate earnings: Workday, Hewlett Packard, NetApp,
Crowdstrike, Splunk, Alvotech, Pinduoduo, Uxin, Canaan, Elbit,
Citi Trends, Fluence Energy, Nano-X Imaging, Safe-T, Leslie's
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
2023 Cyber Monday online sales to cross $12 billion https://tmsnrt.rs/40UJ7L6
US consumer confidence https://tmsnrt.rs/3sbmxRJ
US new home sales in Oct https://tmsnrt.rs/47VlHI5
How Shein stacks up against others in market valuation https://tmsnrt.rs/3N573pE
The Fed's growing 'IOU' to the US Treasury https://tmsnrt.rs/47y31ht
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(By Mike Dolan, editing by Ed Osmond
mike.dolan@thomsonreuters.com)
((mike.dolan@thomsonreuters.com; +44 207 542 8488; Reuters
Messaging: mike.dolan.reuters.com@thomsonreuters.net))