Jobless claims outperform

Mary Daly, president of the San Francisco Federal Reserve, said that the Fed’s current policy of “holding rates steady is an active policy action” and that policy will “grow increasingly restrictive as inflation and inflation expectations fall.” The Fed has two more FOMC meetings this year with markets tentatively pricing in another 25bps hike as data has remained resilient and Fed speakers have erred on the hawkish side. We think the Fed has brought its rate hikes to an end and that rising real rates will help to cool the economy from here.

Initial jobless claims rose by a limited amount to 207k for the week ending September 30. That kept them below market estimates of around 210k. Continuing claims dropped for the prior week, down to 1.66m giving some positive signals about the labour market heading into the nonfarm payrolls for September due out later today. Employment data is likely to be skewed in upcoming prints by the impact of the UAW strike.

Kristalina Georgieva, head of the IMF, said there were higher “chances for a soft landing for the global economy…but we can’t let guard down.” Georgieva said that better than expected demand was helping to support growth this while inflation was cooling.

Today’s Economic Data and Events

• 08:30 IN RBI Repurchase rate: forecast 6.5%
• 10: GE factory orders Aug m/m: forecast 1.5%
• 16:30 US nonfarm payrolls Sep: forecast 170k
• 16:30 US unemployment rate Sep: forecast 3.7%

Fixed Income

• US Treasuries pulled higher for a second day running even with limited economic data to shift markets. Yields on the 2yr UST dropped by 3bps to 5.0183% while the 10yr settled at 4.7185%, down by a bit more than 1bps.
• Bond markets overall treaded water in anticipation of the nonfarm payrolls tonight which will give a stronger signal to treasuries.
• Moody’s downgraded their sovereign rating on Egypt to Caa1 from B3 and changed the outlook on the rating to stable from negative. Moody’s cited the country’s “worsening debt affordability and persistency of foreign currency shortages.” Moody’s did seem to expect that assistance from the IMF and GCC countries would be forthcoming.
• Fitch raised their rating on Energy Development Oman to ‘BB+’ from ‘BB’ with a stable outlook. S&P raised their rating on Bank Muscat to ‘BB+’ from ‘BB’ with a stable outlook.
• JPMorgan is reportedly looking to add Saudi riyal bonds to its emerging market indexes which could attract new funds to the kingdom’s bond market.

FX

• Currency markets swung higher against the dollar overnight in the absence of material data. EURUSD settled higher by 0.4% at 1.053 while GBPUSD added almost 0.5% to 1.2192. USDJPY also moved in favour of the yen, down 0.4% to 148.51.
• Commodity currencies also performed well with USDCAD down 0.3% at 1.3705 while AUDUSD added 0.7% to 0.637 and NZDUSD added 0.9% to 0.5966.

Equities

• There were marginal negative moves for US equity indices on Thursday, ahead of Friday’s much anticipated NFP data release. The Dow Jones fell 0.03%, while the S&P 500 and NASDAQ both declined 0.1%.
• Moves in European equity markets were again mixed. The Euro Stoxx 50 index ended the day unchanged and the Dax declined 0.2%, while the CAC 40 ticked up by 0.02%. The FTSE 100 rose 0.53%. 
• Locally, the ADX and DFM fell 0.71% and 1.18%, respectively.

Commodities

• Oil futures extended their losses for a second day running with Brent down 2% to USD 84.07/b and WTI falling by 2.3% to USD 82.31/b. Saudi Aramco raised its official selling prices for a fifth month, particularly to key Asian markets.