US equity futures were flat on Thursday, reversing earlier modest losses, with Asia and Europe both solidly in the green after days of losses as global markets steadied thanks to bonds halting their rout as investors looked ahead to more weak labor market data tomorrow. As of 7:45am, S&P 500 futures were unchanged at 4,298 and the yield on 10-year Treasuries was flat 4.71%. The dollar was steady while commodities extended their losses dragged by Energy. WTI has lost ~$10 in six trading sessions, -10.8%, and is virtually unchanged on the year after breaching $95 late last week. Today’s macro data focus includes Jobless Claims and Job Cuts; there are two Fed speakers and announcements on the next wave of bond auctions. Tomorrow we get the Sept NFP which according to JPM "may mean more than next week’s CPI."

In premarket trading, Clorox falls as much as 4.1% after the cleaning-products maker said preliminary net sales dropped by 23%-28% in the quarter ended Sept 30 after a cyberattack that disrupted production. Prior to the attack, disclosed in mid-August, Clorox had been expecting “mid-single-digits” organic sales growth in the quarter. MaxCyte owner of a platform used in the cell therapy market, slumps 22% after the company posted preliminary third-quarter revenue that disappointed as customer demand wanes. It’s London shares slumped 30%. Rivian Automotive falls as much as 8% after the electric-vehicle maker announced plans to issue $1.5 billion in convertible debt and reported preliminary third-quarter revenue. Here are some other notable premarket movers:

• BioXcel Therapeutics (BTAI) falls 6.4% after Truist Securities analyst Robyn Karnauskas downgraded the biotech firm to hold from buy.
• Cambium Networks’ (CMBM) shares are plummeting 32%, after the wireless networking infrastructure company reported preliminary third-quarter revenue that prompted at least two analyst downgrades.
• Ceridian HCM Holding Inc. (CDAY) shares are up 2.1% after Needham upgraded the human capital management software company to buy from hold.
• Clorox (CLX) — the cleaning-products maker reeling from a cyberattack that disrupted production — falls 4.4% after saying preliminary net sales dropped by 23%-28% in the quarter ended Sept. 30.
• Nanobiotix ADRs (NBTX) sink 20% after the company said 10 deaths occurred within 180 days of enrollment of a dose-expansion trial for its investigational treatment for patients with locally advanced head and neck cancer.
• Orchard Therapeutics ADRs (ORTX) surge 97% after Japan’s Kyowa Kirin agreed to acquire the UK biopharmaceutical company for $387.4 million, or $16 per American depository share.
• UWM Holdings Corp. (UWMC) shares are up 2.8% after BTIG upgraded the mortgage finance company to buy from neutral.

Investor sentiment remains fragile after a painful selloff spiked volatility across markets this week driven by US bond yields soared to multi-year highs. Weekly US jobless claims data is due later today, and the monthly payrolls report will be released on Friday, which could cement bets on a November rate hike. Currently, swaps price a one-in-four chance of a Fed move next month.

“Friday’s payrolls data, and next week’s inflation number will decide whether the 10-year Treasury yield goes up to 5% or down to 4.5%,” Societe Generale strategist Kenneth Broux said. A higher-than-forecast jobs number could trigger “another wave of dollar-buying and bond-selling,” he added.

Despite nascent signs of market calm, strategists remain skeptical about the long-term economic toll of higher-for-longer interest rates. Echoing similar concerns from JPM and Goldman, overnight Barclays analysts wrote in a note that global bonds are doomed to keep falling unless a sustained slump in equities revives the appeal of fixed-income assets.  

“There is no magic level of yields that, when reached, will automatically draw in enough buyers to spark a sustained bond rally,” analysts led by Ajay Rajadhyaksha said. “In the short term, we can think of one scenario where bonds rally materially. If risk assets fall sharply in the coming weeks.”

European stocks rose to session highs, with the Stoxx 600 rising 0.5% after a three-day decline.  Among individual movers in Europe, Alstom SA shares plunged 35% after the French train maker slashed its financial guidance due to delays on UK contracts and a rise in inventories. Here are the biggest European movers:

• Pandora shares jumped as much as 10% in Copenhagen trading after the jewelry maker presented new financial targets, indicating higher growth rates and profitability over the next three years.
• SMA Solar shares jump as much as 17%, most since June, after the maker of photovoltaic systems boosted its sales forecast for the third time this year. Oddo also upgraded the German firm to outperform.
• Sandoz shares gain as much as 5.6% after the maker of copycat medicines that was spun off from Novartis gets a new overweight rating at Morgan Stanley, an outperform recommendation at ZKB, and is started with a buy at Berenberg based on its encouraging biosimilar pipeline.
• Redcare Pharmacy shares gain as much as 6.8% after the German online pharmacy reported what analysts said was “strong growth” in its preliminary third-quarter results.
• Imperial Brands gains as much as 1.9% after the cigarette maker announced a buyback of as much as £1.1 billion. The news could help the stock rally from recent lows, with UK regulatory concerns looking “overdone,” according to Citi.
• Alstom shares plunge as much as 38%, falling to the lowest level since 2005, after the French rail-equipment maker slashed its free cash flow forecast on a jump in inventories.
• Metro Bank shares slumped as much as 29% to a record low after Bloomberg News reported the UK lender has hired Morgan Stanley to explore a potential capital raise.
• Cofinimmo falls as much as 6.2% after an offering of shares in the Belgian real estate firm prices via BNP Paribas, ING, Belfius/Kepler and KBC at €60 apiece, representing about 7% discount to last close.

Earlier in the session, Asian stocks rebounded after a three-day slide that pushed the regional benchmark into a technical correction, as risk sentiment improved following an easing of this week’s selloff in US Treasuries. The MSCI Asia Pacific Index climbed 1.5%, the most in five weeks, driven by gains in the financial and technology groups. Equity benchmarks in Japan and Taiwan were among the top performers in the region. US stocks advanced overnight after data showing job gains cooled, helping ease fears over the Federal Reserve’s policy path and halting the recent surge in bond yields. Oil fell the most in more than a year overnight, helping lessen concern over inflation.

• Hang Seng initially lagged amid very light news flow and the continued absence of mainland participants, while the latest Hong Kong PMI data printed at a deeper-than-previous contraction. However, the momentum eventually picked up in Hong Kong amid the brightened mood across regional counterparts and after Sunac China’s offshore debt restructuring plans received court approval.
• Australia's ASX 200 was positive following mostly improved trade data and with the gains led by yield-sensitive sectors including real estate and tech.
• Nikkei 225 outperformed on bargain buying with the index set to snap a five-day losing streak.
• KOSPI gained as participants shrugged off the firmer-than-expected CPI data which the BoK expects to stabilise into year-end.

In FX, the Bloomberg Dollar Spot Index pared an earlier fall to rise 0.1% ahead of initial jobless claims data due Thursday

• EUR/USD pared earlier gains to trade little changed on the day
• GBP/USD snapped Wednesday’s gain, falling 0.1% to 1.2119
• USD/JPY dropped 0.1% to 148.98 after hitting the day’s low of 148.26

In rates, Treasuries steadied, with the benchmark 10-year note reversing an earlier move higher to trade around 4.71%, some 4bps lower on the day, and well off 16-year highs hit this week. European government bonds edged lower; 10-year gilt yields rose 5 basis points to 4.63% while 10-year bund yields were 4 basis points higher at 2.95% German and UK long-end yields are up by 5bps and 4bps respectively. US 5s30s spread exceeds 17bp, widest since May, while 2s10s inversion lessens further. Front-end swaps price in around 7bp of rate-hike premium for Fed’s November policy meeting, down from around 9bp at Monday’s close. Dollar IG issuance slate includes MuniFin 3Y; two borrowers priced combined $1b on Wednesday as issuers paid 5bps in new-issue concession on order books that were 5.9 times covered.

In commodities, oil prices add to Wednesday’s sharp decline, with WTI falling 1.2% to trade near $83.30. Spot gold is up 0.1%.

Bitcoin is subdued but remains north of $27,500 with price action uneventful.

Today's US economic data slate includes September Challenger job cuts (7:30am), August trade balance and initial jobless claims (8:30am). Scheduled Fed speakers include Mester (9am), Kashkari (10:40am), Barkin (11:30am), Daly (12pm) and Barr (12:15pm).

Market Snapshot

• S&P 500 futures little changed at 4,294.50
• STOXX Europe 600 up 0.5% to 442.16
• MXAP up 1.1% to 154.02
• MXAPJ up 0.6% to 482.08
• Nikkei up 1.8% to 31,075.36
• Topix up 2.0% to 2,263.76
• Hang Seng Index up 0.1% to 17,213.87
• Shanghai Composite up 0.1% to 3,110.48
• Sensex up 0.7% to 65,692.31
• Australia S&P/ASX 200 up 0.5% to 6,925.49
• Kospi little changed at 2,403.60
• German 10Y yield little changed at 2.94%
• Euro up 0.1% to $1.0515
• Brent Futures up 0.1% to $85.93/bbl
• Gold spot up 0.0% to $1,821.90
• U.S. Dollar Index little changed at 106.72

Top Overnight News

1. Taiwan’s headline CPI climbs to +2.93% in Sept (up from +2.53% in Aug and above the Street’s +2.5% forecast) while core eases to +2.48% (down from +2.57% in Aug). South Korea’s core CPI was flat M/M and inline w/the Street at +3.3%, but the headline number rose to +3.7%, up from +3.4% in Aug and ahead of the Street’s +3.5% forecast. WSJ   
2. Belgium’s intelligence service has been monitoring Alibaba’s main logistics hub in Europe for espionage following suspicions Beijing has been exploiting its growing economic presence in the west. FT
3. UK construction activity fell more than expected in September and posted its biggest slide since May 2020, driven by a steep downturn in housing, according to a closely watched survey. FT
4. Germany’s trade numbers for Aug fall short of expectations, with exports -1.2% (vs. the Street -0.6%) and imports -0.4% (vs. the Street +0.5%). RTRS  
5. Vladimir Putin’s cabinet is turning to increasingly irregular revenue-raising measures to fund a rapid rise in defense spending, which has tripled since Russia’s full-scale invasion of Ukraine. The Russian government has said it aims to spend a staggering Rbs10.8tn ($108bn) on defense next year, three times the amount allocated in 2021, the last year before the invasion, and 70 per cent more than was planned for this year. FT
6. Ukrainian president Volodymyr Zelenskyy has said he is confident he still has broad US backing despite “strange” voices in Congress and the exclusion of more aid for Kyiv from a US spending deal. FT
7. Deficits suddenly matter – it’s been decades since investors had to grapple with elevated spending/debt pushing Treasury yields higher, but this is now a growing part of the present narrative. WSJ
8. JPMorgan Chase has stepped up the pace at which it is securitising billions of dollars of its loan portfolio in anticipation of proposed new US capital requirements for large banks, according to people familiar with the matter. FT
9. Amazon and Microsoft's cloud services face a UK antitrust probe into whether they made it hard for customers to switch or mix providers. BBG

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded higher as risk assets found reprieve after yields eased back from recent peaks following weak US ADP jobs data and a slump in oil prices. ASX 200 was positive following mostly improved trade data and with the gains led by yield-sensitive sectors including real estate and tech. Nikkei 225 outperformed on bargain buying with the index set to snap a five-day losing streak. KOSPI gained as participants shrugged off the firmer-than-expected CPI data which the BoK expects to stabilise into year-end. Hang Seng initially lagged amid very light news flow and the continued absence of mainland participants, while the latest Hong Kong PMI data printed at a deeper-than-previous contraction. However, the momentum eventually picked up in Hong Kong amid the brightened mood across regional counterparts and after Sunac China’s offshore debt restructuring plans received court approval.

Top Asian News

• Alibaba's (9988 HK) logistics arm in Liege, Belgium is under scrutiny from Belgian intelligence over the use of sensitive data, according to FT.
• Sunac China's (1918 HK) offshore debt restructuring plans received approval from a Hong Kong court.
• US Commerce Secretary Raimondo said TikTok poses national security risks, while she hopes to make some chips funding announcements this fall, according to Reuters.
• Taiwan is to probe four firms accused of helping Huawei build chip plants although Taipei said no violations of US trade sanctions have been confirmed so far, according to Nikkei.
• Apple (AAPL) supplier Foxconn (2317 TW) says Q4 is expected to grow significantly compared to Q3; with H2 a traditional peak season for the ICT industry, operations will ramp up sequentially. New product launch in September led to a strong revenue growth compared to prev. quarter, but the revenue experienced a decline YoY due to a high base. In Q3 for cloud and networking products, due to conservative customers pull-in revenue experienced a decline YY. For September, due to increasing allocations in smart consumer electronics products and rising shipment in auto components, revenue for components and other products showed significant growth YY, according to Reuters.

European bourses are choppy but ultimately trade flat at the time of writing in what has thus far been a session void of incremental macro news. Sectors in Europe are mixed, with outperformance in the Travel & Leisure sector as airlines welcome yesterday’s pullback in crude prices. Conversely, to the downside, Energy names lag. US futures saw broad-based losses with sentiment turning sour since the European cash open, coinciding with a slight rise in yields.

Top European News

• ECB's Kazimir said September EZ core inflation confirmed ECB expectations and reiterated that he believes the last rate hike was the final one. He said we need to be convinced we are at the top of the rate cycle based on data available in December and March meetings, and when asked what would trigger a December hike, said this is not a scenario I'd like. He added we are trajectory of declining inflation, and inflation decline is taking somewhat longer. Kazimir added we should not at the moment use other tools such as balance sheet until we are certain we do not need to hike rates further, according to Reuters.
• ECB's de Guindos said the current level of interest rates to help tame inflation; adding "we're data dependent". He added it is premature to discuss rate cuts.
• Low water levels after recent dry weather are preventing cargo vessels from sailing fully loaded on the Rhine river in Germany, with surcharges added to usual freight rates, according to traders cited by Reuters.
• BoE Monthly Decision Maker Panel data - September 2023: One-year ahead CPI inflation expectations increased slightly to 4.9% in September, up from 4.8% in August. Three-year ahead CPI inflation expectations remained flat at 3.2% in September. Expected year-ahead wage growth remained unchanged at 5.1% on a three-month moving average basis, though the single month reading for September at 5.2% was 0.2 percentage points higher than in August.

FX

• DXY index remains relatively contained between 106.500-840 confines and the Buck stayed broadly softer awaiting Challenger Layoffs, jobless claims and NFP on Friday for the next major fundamental driver.
• Antipodeans narrowly outperform with the AUD gleaning support from a wider-than-expected trade surplus.
• Pound was flagging even before a more contractionary than feared UK construction PMI. Cable remains capped by the 10 DMA and retreated towards 1.2100.
• Fix demand and exporter supply underpinned the Yen on the way from sub-149.00 to 148.27, and before the upturn in yields.

Fixed Income

• Having bounced further Wednesday’s lows, bonds are showing traits of fatigue and a reversion to the bear trend that was in place before their midweek reprieve.
• Bunds have regrouped after their retreat to 127.21 and are back above par alongside Eurozone peers bar Bonos.
• Gilts are underwater following a reverse from 92.37 to 91.94, irrespective of a deeper than anticipated contraction in the UK construction PMI.
• T-notes are lagging within a 107-09/106-31+ range ahead of Challenger Layoffs, jobless claims, trade and another busy slate of Fed orators.
• France sold EUR 9.94bln vs exp. EUR 9-10.5bln 3.50% 2033, 2.50% 2043, and 3.00% 2054 OAT.
• Spain sold EUR 6.44bln vs exp. EUR 5.5-6.5bln 3.50% 2029, 2.35% 2033 and 1.00% 2042 Bono.

Commodities

• Crude futures remain on the backfoot following yesterday’s mammoth decline which saw both contracts settle lower by over USD 5/bbl apiece.
• Dutch TTF is softer despite a twist in the Australian LNG saga in which unions are likely to vote to resume strikes at Chevron facilities after Australia's Offshore Alliance said Chevron reneged on commitment given to FWC
• Spot gold is flat intraday awaiting tomorrow’s US labour market report, with the yellow metal uneventful within yesterday’s USD 1,815.50-30.39/oz parameters.
• Australian Union Representative said members are likely to vote to resume strikes at Chevron (CVX) facilities in meetings commencing later tonight, according to Reuters. Australia's Offshore Alliance said Chevron reneged on the commitment given to FWC to incorporate recommendations into Co's EBA's for Wheatstone and Gorgon facilities; members called a meeting at 19:00 tonight for all members on a day shift or off-facility.
• Turkish Energy Minister said the Iraq-Turkey pipeline is operational as of Wednesday and no obstacle to shipping oil to global markets; when asked about oil flows started on the pipeline, and added that Turkey stands ready to ship incoming oil, via NTV.
• Russia's President Putin ordered to consider the introduction of regulated fuel oil prices during the heating season, via Tass.

US Event Calendar

• 07:30: Sept. Challenger Job Cuts +58.2% YoY, prior 266.9%
• 08:30: Sept. Initial Jobless Claims, est. 210,000, prior 204,000
• 08:30: Sept. Continuing Claims, est. 1.67m, prior 1.67m
• 08:30: Aug. Trade Balance, est. -$59.8b, prior -$65b

Central Bank Speakers

• 09:00: Fed’s Mester Speaks at Chicago Payments Symposium
• 10:40: Fed’s Kashkari Moderates Q&A at Conference
• 11:30: Fed’s Barkin Speaks on Economic Outlook
• 12:00: Fed’s Daly Speaks at Economic Club of New York
• 12:15: Fed’s Barr Speaks on Cyber Risk in the Banking Sector

DB's Jim Reid concludes the overnight wrap

Morning from Berlin. I nearly didn't get here as I was held at airport security for 30 minutes as my bag repeatedly set off their alarm when they swabbed it. I got my bag completely emptied and turned upside down, was given a full body search, got interrogated about where I was going, where I lived and where I worked. The only thing they didn't ask me is why bonds keep selling off? I can only think the kids spilt some gunk or glue on my bag leaving some suspicious residue.

With much relief and just before last call, they gave me the all clear and let me go. Relief also extended across financial markets yesterday, as after a fraught start we saw bonds and equities rally back following a tough few days. However, the recovery accelerated with bad employment data, so the answer to how to get out of the recent rout was clearly the return of bad news is good news.

Things looked very different an hour after we went to print yesterday. The bond rout had intensified at an alarming rate, which given recent moves is an impressive thing to say, especially given the time of the day. At this point, the 30yr Treasury yield surpassed 5%, whilst the 10yr Treasury yield hit an intraday high of 4.88%, which we haven’t seen since 8 August 2007, the day before BNP Paribas froze €1.6bn worth of funds due to issues among US subprime mortgages. That’s often taken to be one of the first tremors of the global financial crisis, so in some ways you could say the 10yr yield was finally back to levels seen prior to the GFC. But after reaching those highs in the European morning, we then had a sharp reversal of more than -10bps intraday, with the 10yr yield ending the session -6.3bps lower at 4.73%, which has been followed by a further -2.3bps fall overnight to 4.71% this morning. Meanwhile, 2yr yields (-9.8bps) saw their largest decline since late August. And 30yr yields closed at 4.86% after poking their head above 5% for the first time since 2007 for just a few minutes.

There were also violent moves elsewhere, none more so than oil, with Brent Crude down -5.62% to $85.81/bbl, its largest daily decline in over a year. Bear in mind it was only last Friday that Brent closed at $95.31/bbl, so its losses for the week already stand at -9.97% over just three days so far. If that holds, it would be the worst weekly performance for oil since the banking turmoil back in March. That trend lower is in line with other cyclical commodities over recent days, and copper (-0.88%) fell to a 4-month low as well yesterday.

Back to the bond turnaround, where the rally from the London breakfast yield highs got extra legs after some weaker-than-expected data on the US labour market, as the ADP’s report of private payrolls showed just +89k jobs were added in September (vs. +150k expected). That’s the weakest number since January 2021, and raised concerns about what that might mean for tomorrow’s jobs report, even if the correlation has been weak month-to-month between the two. They could be moving in the same general direction though, and remember the payrolls trend over recent months has been decisively lower, with the 3-month average now standing at a post-pandemic low of +150k. Shortly after ADP, we then got the ISM services for September, which came in broadly as expected at 53.6 (vs. 53.5 expected). However, the new orders subcomponent fell to its lowest so far in 2023, at just 51.8. For markets, the weak data led investors to dial back the chances of another rate hike from the Fed this year, which fell from 52% beforehand to 42% by the close yesterday.

That said, even as Treasuries managed to rally, we got fresh evidence yesterday about how the recent rise in rates was already filtering through to the real economy. For instance, data from the Mortgage Bankers Association showed the 30yr fixed mortgage rate was up to 7.53% in the week ending September 29. That’s an increase of 12bps on the previous week, and the highest they’ve been since 2000. Furthermore, the index of home purchase applications fell to fresh "not since 1995" lows.

Yields also opened at new highs in Europe as well, with the 10yr bund yield trading above 3% for the first time since 2011. But as with the US, they came off those highs during the session, with yields on 10yr bunds (-4.9bps), OATs (-5.1bps) and BTPs (-7.5bps) all falling back. Even so, that wasn’t much help for European equities, and the STOXX 600 fell another -0.14% on the day to a fresh 6-month low.

US equities managed to post a much better performance and close around the highs for the session. The S&P 500 managed to gain +0.81%, its strongest advance in nearly three weeks, with most of the increase coming in the final hour or two of the US session. Megacap tech stocks led the way, as the NASDAQ (+1.35%) and the Magnificent Seven (+2.21%) saw stronger advances. The S&P 500’s advance was a broad one, though energy stocks (-3.36%) suffered amidst the oil weakness. Small caps also underperformed, with the Russell 2000 index only up a modest +0.11%, leaving it -1.83% down YTD.

That recovery has continued in Asia overnight, with equities posting a very strong performance. For instance in Japan, the Nikkei (+1.67%) is currently on track to end a run of 5 consecutive declines, with its best daily performance since August, whilst the TOPIX (+2.00%) is on track for its best performance of 2023 so far. Elsewhere, the KOSPI (+0.76%) and the Hang Seng (+0.76%) have also posted a decent advance, whilst markets in mainland China remain closed for a holiday. Looking forward, US equity futures are steady this morning, with those on the S&P 500 up +0.03%.

Looking at yesterday’s other data, US factory orders were stronger than expected in August, with a +1.2% gain (vs. +0.3% expected). However, Euro Area retail sales in August were worse than expected, with a -1.2% contraction (vs. -0.5% expected). Otherwise, the final composite PMI numbers were slightly better than the initial flash prints, with the Euro Area number at 47.2 (vs. flash 47.1) and the US number at 50.2 (vs. flash 50.1).

To the day ahead now, and data releases from the US include weekly initial jobless claims and the August trade balance. Over in Europe, there’s also French industrial production for August, and the September construction PMIs from Germany and the UK. From central banks, we’ll hear from the Fed’s Mester, Kashkari, Barkin, Daly and Barr, ECB Vice President de Guindos, and the ECB’s Kazimir, Lane and Nagel, along with BoE Deputy Governor Broadbent.