The Day Ahead: Jobless Claims, International Trade, Bond Auction

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Global markets were generally higher overnight and US equity futures are following on their coattails ahead of weekly employment data,  monthly trade gap figures, and the start of the NFL football season.

Ninety minutes before the opening bell, S&P 500 futures are +3.50 points to 1,102.75 while Dow futures are 26 points higher at 10,418. So far in September, the S&P has risen 34.3 points and the Dow has gained 236 points.

Benchmark interest rates are on the rise as investors reallocate funds into equity markets. The 10-year Treasury note is -0-08 at 99-16 yielding 2.681% (+2.7bps) and the October Delivery FNCL 4.0 is -0-03 at 102-18.

“The mood in global equity markets is generally positive,” wrote BMO Capital Markets in a morning note. They mentioned that investor sentiment didn’t seem concerned by the OECD warning that G7 economies are slowing more than expected.

Asian markets were mixed Thursday with Japan’s Nikkei closing 0.8% higher and Hong Kong’s Hang Seng index moving up 0.4%, while China’s CSI 300 fell 1.8%.

Key Events Today:

8:30 ― After the Trade Deficit exploded by nearly $8 billion to $49.9 billion in June, economists anticipate the gap to narrow in July. The belief is that imports, which jumped 3% in June, only surged temporarily as firms restocked shelves, while exports should resume growing after a 1.3% decline. 

“Given the underlying sluggishness in domestic demand, there's no fundamental support for such high import levels, and we expect the trade deficit to fall in coming months,” said economists at IHS Global Insight. “Oil is always a wildcard and will probably dampen the decline in the deficit, with oil imports rising in both volume and price.”

8:30 ― Initial Jobless Claims remain far above what economists have been hoping for. New claims have fallen the past two weeks yet the four week average is 486k, well above levels historically consistent with labor growth in the economy. The total number of people continuing to receive unemployment benefits was 4.456 million for the week ending August 21.

“The drop in claims over the last two weeks suggests the 504k reading in mid-August was a temporary aberration, and that the economy has slowed but not slipped into recession,” said economists at Nomura in a fairly optimistic tone. “At the current level, we think the four-week average is consistent with positive private payroll growth, but perhaps a rising unemployment rate.”

10:15 ― Fed Outright Treasury Coupon Purchase (02/15/2013 - 07/31/2014)

8:30pm ― The 2010/11 NFL season kicks off tonight with the Saints and the Vikings. This NFC title game rematch is filled with subplots, even with the Vikings sans Sidney Rice and the Saints without Darren Sharper. These teams provided a game for the ages last time. Can they duplicate? Brett Favre  and his ankle try to withstand another Gregg Williams' blitz onslaught, while a Super Bowl banner is raised in the Superdome. PREVIEW FROM NFL.COM


ISSUANCE

  • 11:00 Treasury announces 3- and 6-month bills
  • 1:00 Treasury auctions $13 bln 30-year bonds (reopening)
  • Freddie Mac, benchmark 5-year [talk T+30]; Barc/Citi/JPM
  • Bank of Tokyo Mitsubishi, benchmark 2-part 3s/5s [guidance T+85(3s);+105(5s)]; MS/MUS/JPM
  • Nabors Industries, $500m 10-year; Citi/UBS
  • Duquense Light Holdings, $300m 10-year; BAML/Barc/Scotia
  • Korea Hydro & Nuclear Pwr Corp, benchmark offering likely this week; BAML/Citi/DB/HSBC/UBS
  • CBA, potential benchmark deal; JPM
  • Santander Chile, benchmark deal likely following roadshow; Santander/DB/JPM