Investors have become even more convinced that the Fed will cut rates next week, pushing yields on the short-term end of the U.S. Treasury curve further lower. Long-term yields, however, continue to be under pressure due to concerns about many government deficits. A positive outcome from the 30-year bond auction in Japan last night calmed tensions in this sector. Today, the focus will be on long-term auctions in France and Great Britain, both struggling with financial difficulties. But the key data to watch will be tomorrow's US labor market data. Wall Street closed positively yesterday, buoyed by Alphabet's strong gains. European stock markets opened little changed. All eyes are on the Mediobanca board.
Record bond issues gobbled up by investors
The bond market continues to be flooded with new emissions with sales of over $128 billion so far this week, while the investors are gobbling up new debt, attracted by still high yields.
Last night's auction of 30-year Japanese bonds, which had raised concerns about coverage due to domestic political uncertainty and doubts about debt sustainability, also showed a positive result. Instead, the auction reached a bid-to-cover ratio of 3,31, after the yield on debt with similar maturities hit a record high. Although demand was the lowest since June, the turnout was sufficient to stem a new wave of anxiety gripping the bond market, at least for now.
This week, the Asian broadcasters, including the State Bank of India and Japan's Mitsubishi Corp., took advantage of theinsatiable appetite Global credit markets are selling dollar bills at record spreads. Since Monday, Asia-Pacific companies have sold over $16 billion in U.S. currency-denominated debt. China Construction Bank Corp. issued dollar-denominated bonds on Thursday, while Philippine oil refiner Petron Corp. instructed banks to conduct a potential debt sale.
Today France and the United Kingdom are put to the test by the markets with long-term auctions
Today the following will be under the microscope: auctions in France and the United KingdomParis, grappling with a government crisis and struggling public finances, will sell 10-, 17-, and 31-year bonds.
UK to offer 20-year bonds.
Il gap The gap between short-term and long-term U.S. Treasury yields has risen in recent weeks. Two-year yields, which tend to more closely track expectations for the Fed's monetary policy, hit their lowest level since May yesterday, after yesterday's new data reinforced expectations of a Fed rate cut.
Meanwhile, long-term yields have risen in recent weeks as investors demand greater compensation for financing government deficits, a trend seen in several countries around the world. In the US, the Trump administration's spending and tax cuts are expected to worsen the country's fiscal situation. Support is expected from tariffs, a result jeopardized by a federal court ruling last week.
Il US Treasury yield The 30-year yield briefly rose above 5% during Asian trading and last settled at 4,9%. The gap between two- and 2-year U.S. Treasury yields stands at around 30 basis points, roughly the highest since December 129, while the comparable figure in the UK is the highest since 2021.
Wall Street increasingly convinced of a Fed rate cut. Focus on Alphabet and Apple.
Wall Street stocks recovered ground yesterday after new data yesterday reinforced expectations of a Fed rate cut, while Alphabet, Google's parent company, rose sharply following a favorable antitrust ruling.
A gauge of labor demand fell by 176.000 yesterday, reaching 7,181 million by the last day of July, the Labor Department's Bureau of Labor Statistics reported Wednesday in its "JOLTS" report. Economists had forecast 7,378 million job vacancies. Federal Reserve officials, including Governor Christopher Waller, reiterated their support for the rate cuts in the coming months. Stephen Miran, President Donald Trump's pick to fill a vacancy on the Federal Reserve Board, said he will commit to preserving the central bank's independence ahead of today's Senate confirmation hearing. According to CME Group's FedWatch tool, traders are now pricing in a 96,6% probability of an interest rate cut at the Fed's September meeting.
Il Dow Jones fell by 0,05%, the S&P 500 increased by 0,5% and the Nasdaq Composite added about 1%. A jumped by about 9%, while Apple rose nearly 4% as a ruling allowed Google to continue making lucrative payments to the iPhone maker. Apple Inc. also plans to launch its own AI-powered web search tool next year, intensifying competition with OpenAI and Perplexity AI Inc.
But the most important data to monitor will be tomorrow's (released in the early afternoon in Italy) on non-farm payrolls. Economists estimate that around 75.000 jobs were created in August, based on the median of a survey. Bloomberg, while the unemployment rate is estimated at 4,3%. Four consecutive months of job growth below 100.000 would mark the weakest period since the pandemic began in 2020.
Chinese stocks reverse course, held back by cooling measures
In Asia, MSCI's index of Asia-Pacific shares outside Japan gave up early gains and fell 0,2%, dragged down by losses in China. The blue chip CSI 300 fell 2,5% and was on track for its biggest one-day sell-off since April, after Bloomberg News reported that financial regulators are preparing cooling measures for the market stock, including a ban on short selling, due to concerns about the speed of the $1,2 trillion rally since early August.
Concerns about further government controls have triggered sharp losses in Chinese indices, with markets also vulnerable to profit-taking following a strong rally in August. Chinese stocks had largely outperformed their Asian and global peers in the previous month, amid growing optimism about local efforts in artificial intelligence and Beijing's stimulus measures.
As for the individual titles, BYD Co Ltd loses 2%, after Reuters reported that the electric vehicle maker cut its annual vehicle sales forecast by about 16% to 4,6 million units. Cambricon Technologies, one of the companies at the heart of China's tech rally in recent weeks, is down 9%, extending its losses from its recent all-time high to 20%.
Other chipmaking stocks, which had seen a strong rally on optimism over more domestically sourced Chinese artificial intelligence chips, also lost ground: Semiconductor Manufacturing International e Hua Hong Semiconductor They lost between -4% and -5%. Finally, biotechnology companies listed in Hong Kong also ended up in the spotlight: WuXi AppTec and WuXi Biologics suffered drops between 1% and 4%.
Meanwhile, the Indian stocks jumped at the open after the government cut taxes on several goods to stimulate consumption and counter US tariffs, with the BSE Sensex rising 1,1% at market open.
In the commodity markets, the Petroleum fell for the second consecutive day, with traders concerned about a possible increase in inventories by theOPEC + and an industry estimate that showed higher inventories at a major storage hub. The global benchmark Brent crude fell 0,7% to $67 a barrel, while West Texas Intermediate fell below $64. Analysts at Goldman Sachs Group Inc. say Brent crude is set to fall as low as $50 a barrel next year due to a global surplus.
Precious metal prices fell, with the Spot gold fell 0,8% to $3.531,63 an ounce after hitting a record high yesterday of $3.578.
European stock markets saw little change. At Piazza Affari, eyes are on Mediobanca and MPS.
European markets are expected to open close to parity. The Euro Stoxx 50 futures are expected to be little changed.
MPS Bank, Mediobanca. The offer's subscriptions have exceeded the minimum threshold of 35% of the capital, reaching 38,5172%. This is what emerges from data from the Italian Stock Exchange. MPS's offer has therefore been successful. A meeting of the Mediobanca Board of Directors is scheduled to evaluate the new offer.
Buzzi – Goldman Sachs initiated coverage with a Neutral rating, with a target price of 47 euros.
Eni The company, through its Azule Energy joint venture with BP, will invest $5 billion in Angola over the next four to five years to drill 18 exploration wells. The group may also announce details regarding Mozambique by the end of 2025, the chief operating officer told Reuters.
Mediobanca – Equita has lowered its recommendation from Buy to Hold, with a target price of 24 euros.
Pirelli, Lottomatica – Starting September 22, Lottomatica will replace Pirelli in the FTSE MIB index, according to FTSE Russell. Fincantieri is first on the reserve list.
stm – Citi raised its target price to 27 euros, from 25 euros previously, confirming its Buy rating.
Unipol – Barclays raised its target price to 18,5 euros from 18 euros.
Bank System – The Presidency of the Council of Ministers has announced that the voluntary public takeover bid launched by Banca CF+ does not fall within the scope of the "golden power" legislation.
Mfe, Prosiebensat.1. – BaFin will publish the results of the supplementary public tender offer for Prosiebensat.1 shares.
