Morning Call For Thursday, Oct. 4

Overnight Markets And News

Dec E-mini S&Ps (ESZ18 -0.37%) this morning are down -0.36% and European stocks are down -0.47% as a surge in T-note yields undercuts global stock prices. The 10-year T-note yield jumped to an 8-1/3 year high of 3.23% as stronger-than-expected economic data and hawkish comments from Fed Chair Powell on Wednesday bolstered the case for a faster pace of Fed rate hikes. The U.S. Sep ISM non-manufacturing PMI rose to a 21-year year high and Fed Chair Powell said the Fed could eventually raise the Fed funds rate past the neutral level. The increase in T-note yields has also boosted other global government bond yields as the UK 10-year gilt yield climbed to a 1-1/2 year high of 1.668% and the German 10-year bund yield rose to a 1-week high of 0.549%. Asian stocks settled mostly lower: Japan -0.56%, Hong Kong -1.73%, China closed for holiday, Taiwan -1.33%, Australia +0.49%, Singapore -1.10%, South Korea -1/60%. India -2.24%. Japanese stocks were under pressure from the increase in government bond yields after the Japan 10-year bond yield jumped to a 2-1/2 year high of 0.165%.

The dollar index (DXY00 +0.08%) is up +0.12% at a 6-week high as the jump in T-note yields boosts the dollar’s interest rate differentials. EUR/USD (^EURUSD +0.22%) is up +0.17%. USD/JPY (^USDJPY -0.20%) is down -0.20%.

Dec 10-year T-note prices (ZNZ18 -0-125) are down -12 ticks to a fresh contract and 8-1/3 year nearest-futures low.

The German Markit Sep construction PMI fell -1.3 to 50.2.

UK Sep new car registrations fell -20.5% y/y to 338,834, the biggest decline in nearly 8 years. Year-to-date new car registrations ore down -7.5% to 1,910,820.

U.S. Stock Preview

Key U.S. news today includes: (1) Sep Challenger job cuts (Aug +13.7% y/y), (2) weekly initial unemployment claims (expected +1,000 to 215,000, previous +12,000 to 214,000) and continuing claims (expected +4,000 to 1.665 million, previous +16,000 to 1.661 million), (3) Aug factory orders (expected +2.1%, Jul -0.8% and +0.2% ex transportation).