US bonds may be closed for the Columbus Day holiday, but stocks are open and merrily melting up on pace for their 46th record high of 2024. As of 8:00am, S&P futures are higher by around 0.2% and trading above Friday’s all time high while Nasdaq 100 futs rise 0.2% with NVDA, AAPL, and GOOG leading in MegaCap Tech as investors gear up for the latest round of corporate earnings and turn increasingly turn their focus toward the US election where a pro-market Trump victory looks more likely by the day. In China, the CSI 300 Index closer ~2% higher after a choppy session where markets pumped, then dumped, then rebounded once the National Team stepped in as traders digested the latest disappointing pledges from Beijing over the weekend to support the economy. Europe's Estoxx 50 is flat. US cash bond markets are closed today; the Bloomberg Dollar index is higher. Commodities are mixed: oil prices are -2.3% lower, base metals are higher, and precious metals show mixed movements. This week, we will have a busy earnings calendar, along with Retail Sales release on Thursday.
In premarket trading, cryptocurrency-linked stocks were lifted by gains in Bitcoin as traders bet Beijing’s latest stimulus efforts would keep speculators chasing crypto rather than Chinese stocks. MicroStrategy led gains in cryptocurrency-linked companies. Boeing fell again as the beleaguered planemaker plans to cut its global workforce by about 10% and announced $5 billion in charges. SentinelOne Inc. shares rose 4.2% as Piper Sandler upgraded the cybersecurity software company saying current estimates of its market share gains are too low. Meanwhile, US-listed casino stocks tumbled after the election of a new Macau leader, who has warned against the influence of the gambling industry in the city. Here are some other notable premarket movers:
A newly accommodative Federal Reserve is providing fresh fodder for bulls — but they’re also fighting against lofty valuations. The S&P 500’s 20% gain through September has been its strongest performance for the first nine months of a year since 1997, according to National Bank of Canada economists including Stefane Marion. That’s pushed earnings-based valuations pushed to rich levels across industries.
“It remains uncertain whether the market will finish the year as strongly as it began and whether this easing cycle will provide substantial momentum for equities,” the economists wrote in a note to clients. “The current easing cycle is unfolding in an environment of unusually high valuations.”
Meanwhile, with just weeks to go until the election showdown between Kamala Harris and Donald Trump, odds are increasing shifting in favor of the latter but it’s “still too close to call,” according to Jefferies strategist Mohit Kumar. “A Trump victory would likely be positive for risk sentiment, though more for US assets at the expense of Europe and rest of the world,” Kumar said. “In our view, the environment remains broadly positive for risky assets.”
Corporate earnings are the next test. Results from Citi, Goldman and Bank of America are due Tuesday, where the banks will provide an early verdict on the impact of interest rate cuts on their bottom lines. JPMorgan, Wells Fargo and Bank of New York Mellon all topped estimates Friday. In Europe, profits are anticipated to come in lower due to anemic economic growth and a stunted recovery in China, which is likely to drag down luxury goods makers like LVMH.
“The season has set off on the right foot, with JPMorgan and Wells Fargo reporting better-than-expected earnings,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown. “Consumer resilience is shining through and that’s set the bar high.”
And speaking of Europe, stocks are flat with the Stoxx 600 little changed on the day with consumer products and travel & leisure shares the worst laggards, while technology and telecommunications stocks fared best ahead of the European Central Bank decision on Thursday, where another rate cut now seems likely. Here are the biggest movers Monday:
Asian equities reversed early losses to eke out small gains after Chinese stocks rebounded on Beijing’s commitment to shore up the economy. The MSCI Asia Pacific excluding Japan index rose as much as 0.4%, erasing an earlier drop of as much as 0.8%. Financial and technology shares were among the top gainers. Stocks also rose in South Korea, Taiwan and Australia. Markets in Japan and Thailand were closed for a holiday.
Mainland Chinese stocks closed higher after a volatile session as investors await more details on fiscal measures. Gauges in Hong Kong pared declines. Despite promises of more support for the struggling property sector and hinting at greater government borrowing, a briefing by China’s Finance Minister Lan Fo’an on the weekend didn’t produce the headline dollar figure for fresh fiscal stimulus that the markets had sought. Still, after an initial swoon, China’s main CSI 300 Index finished 1.9% higher in volatile trading Monday, after capping its worst week since late July as Beijing’s latest efforts to jumpstart growth disappoint those seeking more details on incentives. That said, don't expect the bounce to last.
“While some investors may be disappointed, it seems to us that the policy pivot has occurred, we should see continued momentum in the coming weeks,” BofA Securities’ strategist Winnie Wu wrote in a note. “Be long-term greedy, short-term cautious” on China equities, she said.
In FX, the Bloomberg Dollar Spot Index rises 0.1%. The Norwegian krone is the weakest of the G-10 currencies, falling 0.4% against the greenback.
In rates, treasury futures are marginally lower on the day, following losses seen in core European rates led by long-end end gilts, where UK 30-year yields are cheaper by 3bp on the day. Cash Treasuries trading is closed Monday for the Columbus Day holiday, the session does include scheduled Fed speakers from both Kashkari and Waller. No US data is scheduled. Treasury 10-year note futures are lower by around 10 ticks on the day, trading on lows at 111-29+ and edging below Friday session lows but remaining inside last week’s trading range. German government bonds are also steady with little economic data to dictate otherwise The France-Germany 10-year yield spread has barely budged despite Fitch putting France on negative outlook on Friday just a day after the government presented its 2025 budget.
In crypto, bitcoin climbed to the highest level in two weeks as investors took disappointment over China as good news for cryptocurrencies which are seen as potential beneficiaries of China stock outflows.
In commodities, oil prices declined, with Brent crude futures falling 2.1% to $77.40 a barrel, and as OPEC cut its global oil demand growth forecast for the third consecutive month. Spot gold rose $5 to $2,661/oz, trading at all time highs.
Looking at today's calendar, there are no US events scheduled due to the Columbus Day holiday. This week includes retail sales, industrial production and housing starts. Fed speakers scheduled include Kashkari (9am, 3pm) and Waller (3pm)
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APAC stocks were predominantly higher but with the upside capped amid the Japanese holiday closure, soft Chinese inflation and lack of China stimulus details, while participants await Chinese trade data. ASX 200 was underpinned amid strength in mining stocks despite a pullback in commodity prices. Hang Seng and Shanghai Comp traded mixed in which the former initially slipped back beneath the 21,000 level with notable weakness in tech and consumer stocks after the Chinese Ministry of Finance's press briefing omitted an actual stimulus size. Conversely, the mainland ultimately shrugged off the lack of stimulus details and softer inflation data, while other government departments also pledged support efforts, picking up further throughout the session.
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European bourses, Stoxx 600 (U/C) began the session on a modestly firmer footing, but now display a more mixed picture. Indices dipped off best levels following softer-than-expected trade data from China, with particular weakness in Chinese exports. European sectors are mixed. Travel & Leisure underperforms amid news that the UK is considering a tax raid on gambling firms, whilst Consumer Products is weighed on by Luxury names after China reported weak inflation metrics. US Equity Futures (ES +0.1% NQ +0.1% RTY +0.2%) are modestly mixed, taking a breather from the strong session seen on Friday.
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DB's Jim Reid concludes the overnight wrap
This week kicks off with a partial US holiday (Columbus Day) today where bond markets will be closed but with equity markets remaining open. The main news over the weekend has been from China where the highly anticipated Ministry of Finance press conference on Saturday was light on specifics of immediate stimulus measures but provided strong forward commitment and the announcement of a large-scale local government debt swap that exceeded our economists' expectations, with them suggesting it could mark a multi-year turning point in China's fiscal policy framework. They have raised their 2024 GDP forecast to 4.9% (from 4.7%), based on already announced measures and are expecting more concrete measures to now appear at the upcoming NPCSC in late October.
Overnight Chinese markets opened firm, fell back just below zero, but are now back close to their opening highs. Currently, the Shanghai Composite is up by +1.66%. Oil is -1.2% lower after the China briefing but that could be as much due to taking out some weekend geopolitical risk premium with no Israeli retaliation seen as yet. Elsewhere, the KOSPI has gained +1.02% and the S&P/ASX 200 is up by +0.42%. However, the Hang Seng is -0.42% lower. S&P 500 (-0.06%) and NASDAQ (-0.21%) futures are also on the softer side. Japanese markets are closed for a holiday.
Also over the weekend, data revealed that China’s September CPI rose by +0.4% year-on-year, the slowest in three months, compared to a +0.6% rise in August and below market expectations of a +0.6% increase. PPI fell by -2.8% year-on-year, the fastest decline in six months, compared to a -1.8% drop in the previous month and below the expected -2.6% decline. So weaker prices than expected all round, but with the subsequent stimulus announcement markets should be comfortable excusing recent data for now.
In terms of this week, the key events will likely be on Thursday with US retail sales and jobless claims, alongside the latest ECB meeting. Outside of this, US earnings season starts to accelerate after last Friday's unofficial start and there are plenty of central bank speakers to digest as well. Before we dig into these, the other main global highlights this week are the NY Fed 1yr inflation expectations (today), UK employment, German/European ZEW survey, ECB bank lending survey, Eurozone IP and Canadian CPI (tomorrow), UK inflation (Wednesday), US IP and NAHB housing index (Thursday) and US housing starts/building permits, China's monthly data dump (including Q3 GDP, retail sales, IP, and property data), alongside Japanese CPI to round out the week on Friday.
Digging a bit more into that week ahead now, of all the Fedspeak, Waller today may be the most interesting given he's traditionally a hawk and is a voter. In his last outing, Waller suggested that another 50bp reduction in an upcoming meeting was a possibility if the labour market weakened further or if inflation continued to come in softer than expected. Since then the opposite has seemingly occurred so will he revert back to more hawkish form?
Skipping to Thursday, September US retail sales will be a swing factor in putting together final Q3 GDP forecasts but jobless claims could spike a significant amount higher (DB forecast 270k vs. 258k last week) and to 3-year highs due to the latest storm. We were surprised that the market zoned in on the spike last week as much as it did as you have to assume for now that most, if not all, of the increase was storm related. The impact of the storm will also feed into this month's payroll data so there will be a lot of difficulty in assessing employment trends in the next several weeks. Even retail sales might spike up a little this week as storm preparation in Florida may have boosted sales at the end of September.
The highlight of the week in Europe will be the ECB decision on Thursday. Our European economists expect a 25bps rate cut following recent lower-than-expected inflation prints as well as weaker growth (see their full preview here). The central bank will also release its bank lending survey on Tuesday and the survey of professional forecasters on Friday. The lending survey is a good guage to see whether we're past the peak impact of the monetary transmission mechanism. In recent quarterly surveys, lending has improved with future expectations improving too so things have been looking up. Elsewhere in Europe keep an eye for the budget in Italy tomorrow, ahead of the EU deadline. Fitch and S&P are likely to opine on Italy's rating after the close on Friday. The former could influence the latter to some degree. Indeed, late on Friday Fitch placed France on negative outlook after its budget announcement last week saying that "Fiscal policy risks have increased since our last review." Over in Asia, the focus outside of China will be on the Japanese national CPI due on Friday.
In terms of earnings, we'll start to see some momentum with the highlights including key semiconductor firms TSMC (Thursday) and ASML (Wednesday). Otherwise, US bank results will continue to come in with Bank of America, Citigroup and Goldman Sachs (all tomorrow) the highlights, alongside large cap healthcare names including UnitedHealth, Johnson & Johnson (both tomorrow) and Abbott (Wednesday). Other notable names include Netflix and Blackstone on Thursday and Procter & Gamble on Friday.
Looking back at last week now, risk assets put in a decent performance and looked through ambiguous data. The S&P 500 ended up advancing +1.11% (+0.61% Friday) and posted a 5th consecutive weekly gain, with Friday seeing its 45th record high of 2024 so far. Banks saw a particularly strong performance after the start of earnings season, with the KBW Bank Index ending the week up +3.98% (+3.04% Friday) at its highest level since April 2022. Europe also saw gains, with the STOXX 600 up +0.66% (+0.55% Friday), but in China the Shanghai Comp fell -3.56% (-2.55% Friday) amidst disappointment at the lack of detail around China’s stimulus.
Whilst equities were mostly advancing, sovereign bonds lost ground in general following on from the post payrolls trend the previous Friday. Inflation risk was also back in the spotlight though, particularly after the US CPI reading was stronger than expected last week. Indeed, the US 2yr inflation swap picked up another +13.9bps last week to 2.48%, its highest level in over three months. In turn, that meant investors slightly dialled back their expectations for rate cuts, with the rate priced in by the Fed’s December 2025 meeting up +4.9bps over the week to 3.34%. So when it came to sovereign bonds themselves, yields on 10yr Treasuries were up +13.3bps (+3.8bps Friday) to 4.10%, and those on 10yr bunds were up +5.6bps (+0.9bps Friday) to 2.26%.
Finally, oil prices ended the week modestly higher, although only after paring back their strong gains from earlier in the week. Indeed at one point, Brent crude reached an intraday peak above $81/bbl, but by the close on Friday, it was only up +1.27% (-0.45% Friday) to $79.04/bbl. That came alongside a modest increase in gold prices, which ended up posting a weekly gain of +0.11% thanks to stronger gains towards the end of the week (+1.42% Friday) as inflation risks came back into focus.