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Treasuries gobbled up, oil braces for OPEC

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A look at the day ahead in U.S. and global markets from Mike Dolan

Subdued world markets were relieved at the ease with which Monday's sale of U.S. Treasuries was absorbed, but firmer oil prices ahead of the week's postponed OPEC+ meeting cut across any further decline in yields for now.

Benchmark Treasury yields US10YT=RR fell back more than 10 basis points to 4.37% after a total of $109 billion of 2 and 5-year notes hit the Street on Monday without much disruption. Another weak U.S. housing readout, with sub-forecast new home sales last month, perhaps flattered the post-auction moves.

Either way, it helped calm any jitters about another heavy diary of debt sales - with some $39 billion of 7-year notes up for grabs later on Tuesday.

November consumer confidence data will also be released as investors assess the mood on the High Street and online from "Black Friday" and "Cyber Monday" retail activity.

Preliminary estimates from Adobe Digital Insights indicated that spending online on Monday was on track to reach a record $12.4 billion as bargain hunters turned out in force. The estimate, which does not account for inflation, predicts an increase of more than 9% from the $11.3 billion that shoppers spent during Cyber Monday last year.

That's likely a mixed blessing for Federal Reserve watchers - the continued buoyancy of consumption but with increasing price discrimination.

With investors confident the Fed will cut rates through the second half of 2024 at least, top Fed policymakers are on the stump again Tuesday.

Fed futures priced about 85bps of rate cuts through next year, starting in June, though many major banks expect even more.

Oil prices have been a critical factor in the inflation battle of the past two years and although they retreated some 20% from highs of two months ago, traders are now watching closely for signs of further output cuts at OPEC+'s postponed meeting on Thursday - despite murmurs of rifts in the bloc.

Israeli forces and Hamas fighters appeared to be abiding by a truce for a fifth morning on Tuesday, after a four-day ceasefire was extended at the last minute for at least two days to let more hostages go free.

Encouraged by the retreat in debt yields, softening economic data and cooling geopolitical tensions, the dollar index .DXY fell back to its lowest since August and is now down 3.8% this month.

Stock indexes were pretty directionless, however. A modest loss in the S&P500 .SPX on Monday added little new impetus and futures were flat ahead of Tuesday's bell.

It was a mixed picture in Asia and Europe too, with Hong Kong's Hang Seng .HSI underperforming with a loss of almost 1%.

There was fresh buzz about new equity sales though. Fashion company Shein has confidentially filed to go public in the United States, according to Reuters sources, in what is likely to be one of the most valuable China-founded companies to list in New York.

Elsewhere, St. Louis Fed researchers estimated the Federal Reserve will need nearly four more years to cover a historic operating loss and start sending profits again to the U.S. Treasury again.

Key developments that should provide more direction to U.S. markets later on Tuesday:

* U.S. Nov consumer confidence, Richmond Fed Nov business survey, Dallas Fed Nov service sector survey, Sept house prices

* U.S. Treasury sells 7-year notes, 12-month bills

* Federal Reserve Board Governor Christopher Waller, Fed Board Governor Michelle Bowman, Fed Vice Chair for Supervision Michael Barr, Chicago Fed President Austan Goolsbee all speak; European Central Bank chief Christine Lagarde and ECB chief economist Philip Lane both speak; Bank of England Deputy Governor Dave Ramsden and BoE policymaker Jonathan Haskel both speak

* U.S. corporate earnings: Workday, Hewlett Packard, NetApp, Crowdstrike, Splunk, Alvotech, Pinduoduo, Uxin, Canaan, Elbit, Citi Trends, Fluence Energy, Nano-X Imaging, Safe-T, Leslie's

2023 Cyber Monday online sales to cross $12 billion https://tmsnrt.rs/40UJ7L6

US consumer confidence https://tmsnrt.rs/3sbmxRJ

US new home sales in Oct https://tmsnrt.rs/47VlHI5

How Shein stacks up against others in market valuation https://tmsnrt.rs/3N573pE

The Fed's growing 'IOU' to the US Treasury https://tmsnrt.rs/47y31ht

By Mike Dolan, editing by Ed Osmond mike.dolan@thomsonreuters.com


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