cti2015header-morning comments web

US tsys trading lower on relatively heavy volume in TY1 futs (378k) after stronger payrolls with European equities lower, the Nikkei down 3.5% and the USD index lower for a fifth day. Tsys fell ealier with the 10Y reaching above 1.8% but later bounced on weak Tankan survey – the Japanese manufacturing fell to the lwest levels since June 2013 adding pressure for further BOJ stimulus. GOCs recovering in post payroll bounce, with the long end of the GOC curve well bid on lower oil prices.

News headlines

  • Stocks Start Quarter in Doldrums as Oil Falls; Bonds Pare Drop (Bloomberg) Global stocks fell the most in more than three weeks as a new quarter got under way, with Japanese equities leading losses and the yen strengthening. Treasuries pared declines before U.S. payrolls data. Europe’s equity benchmark was set to erase all of its gains for March in a single day, and Japan’s Topix had its worst day in seven weeks after the Tankan business survey slumped. Crude oil slid after Saudi Arabia’s deputy crown prince said the kingdom will only freeze its oil output if Iran and other major producers do so. Copper rose after a gauge of Chinese manufacturing unexpectedly expanded, while shares in Shanghai were little changed.
  • China Factory Gauge Unexpectedly Jumps as Stimulus Kicks In (Bloomberg) China’s official factory gauge showed improving conditions for the first time in eight months, suggesting the government’s fiscal and monetary stimulus is kicking in. The manufacturing purchasing managers index rose to 50.2 in March, compared with a median estimate of 49.4 in a Bloomberg News survey of economists. The measure matches its highest level since November 2014. The non-manufacturing PMI rose to 53.8 from 52.7 in February. Metals rose after the report.
  • Japanese gloom ensures slow start to quarter for world stocks (Reuters) Gloomy Japanese manufacturing data on Friday ensured a downbeat start to the second quarter, driving stocks and oil lower and supporting safe-haven assets like gold and the Japanese yen. Still bruised from a turbulent first quarter, investors took their cue from the Japanese data rather than more encouraging figures from China’s manufacturers, before the pivotal U.S. payrolls report later in the day. Japan’s Nikkei .N225 sank 3.5 percent in its steepest daily fall since mid-February, dragging down shares across Asia. That set the bearish tone for Europe, where the main indices were all down more than 1 percent in early trading.
  • Saudi Arabia Will Only Freeze Oil Production If Iran Joins (Bloomberg) Saudi Arabia will only freeze its oil output if Iran and other major producers do so, the kingdom’s deputy crown prince said, challenging the country’s main regional rival to take an active role in stabilizing the over-supplied global crude market. The warning by Mohammed bin Salman, 30, who’s emerged as Saudi Arabia’s leading political force, leaves the outcome of a meeting between OPEC and other big oil producers this month in question. Iran has already said it plans to boost its production after the lifting of sanctions following a deal to curb the country’s nuclear program.
  • Prices Sag in Warning to ECB Even as Manufacturing Picks Up (Bloomberg) Prices for factory goods in the euro area dropped the most since 2009 in March, in a sign that weak inflationary pressures may be cutting into companies’ ability to charge more even as manufacturing expands. Markit Economics said its Purchasing Managers Index, which gauges manufacturing activity and comes alongside the price figures, increased to 51.6 from 51.2 in February. That keeps it just above the 50 level that separates expansion from contraction. While the reading is higher than the initial estimate of 51.4, it still caps the weakest quarter in a year.
  • South Korea exports tumble for 15th straight month (Market Watch) South Korea’s exports fell in March for the 15th consecutive month due to sluggish global demand, but the decline was smaller for the second month in a row, according to the Ministry of Trade, Industries and Energy. Exports dropped 8.2% from a year earlier to $42.98 billion in March, following the previous month’s 12.2% drop, showed preliminary data released Friday by the ministry. The March reading beat market expectations for a 9.9% decline.
  • Japan big manufacturers’ mood down in Q1 – BOJ tankan (Reuters) Confidence at big Japanese manufacturers worsened in the three months to March and is seen falling further ahead, a closely watched central bank survey showed on Friday. The headline index for big manufacturers’ sentiment stood at plus 6 in March, down from plus 12 seen three months ago, the Bank of Japan’s quarterly “tankan” survey showed. That compared with the median estimate of plus 8 in a Reuters poll of economists.
  • BlackBerry Ltd loss smaller than expected, but revenue falls short (Financial Post) BlackBerry Ltd. on Friday reported a fiscal fourth-quarter loss of $238 million, after reporting a profit in the same period a year earlier. The Waterloo, Ontario-based company said it had a loss of 45 cents per share. Losses, adjusted for non-recurring costs and amortization costs, came to 3 cents per share. The results topped Wall Street expectations. The average estimate of 12 analysts surveyed by Zacks Investment Research was for a loss of 10 cents per share.
  • Bombardier receives order for 20 business jets (Reuters) Canadian planemaker Bombardier Inc , which is seeking government aid to help finance its CSeries passenger jet program, said it received a firm order for 20 Challenger 350 aircraft. The company said on Friday the order was valued at about $534 million based on the list price, but did not disclose the name of the buyer, citing competitive reasons. (Reporting by Amrutha Gayathri in Bengaluru; Editing by Saumyadeb Chakrabarty)
  • Saudi Arabia Plans $2 Trillion Megafund for Post-Oil Era: Deputy Crown Prince (Bloomberg) Saudi Arabia is getting ready for the twilight of the oil age by creating the world’s largest sovereign wealth fund for the kingdom’s most prized assets. Over a five-hour conversation, Deputy Crown Prince Mohammed bin Salman laid out his vision for the Public Investment Fund, which will eventually control more than $2 trillion and help wean the kingdom off oil. As part of that strategy, the prince said Saudi will sell shares in Aramco’s parent company and transform the oil giant into an industrial conglomerate. The initial public offering could happen as soon as next year, with the country currently planning to sell less than 5 percent.


 Overnight markets 

  • Overview: US 10yr note futures are up 0.024% at 130-14, S&P 500 futures are down -0.69% at 2037.25, Crude oil futures are down -3.16% at $37.13, Gold futures are down -1.31% at $1219.4, DXY is up 0.11% at 94.69.

US Economic Data 

  • Change in Nonfarm Payrolls was 215k, stronger than expected and down from prior month
  • Change in Manufacturing Payrolls was -29k weaker than expected and down from prior month
  • Unemployment Rate was 5%, weaker than expected and up from prior month
  • Markit US Manufacturing PMI will be released at 9:45 AM
  • ISM Manufacturing will be released at 10:00 AM
  • ISM Prices Paid will be released at 10:00 AM
  • Construction spending MoM change will be released at 10:00 AM
  • University of Michigan Sentiment will be released at 10:00 AM 

Canadian Economic Data

  • RBC Canadian Manufacturing PMI will be released at 9:30 AM


Disclosure and Disclaimer

The following sources of information have been, or may have been, used partially or in their entirety to compile the herein provided CTI Capital Securities Inc. (“CTI Capital”) ‘Morning Comments.’ CTI Capital believes these sources to be generally reliable, however, as said sources are varied and from third parties, CTI Capital cannot guarantee the accuracy or completeness of said information: Canadian Press (CP); Bloomberg News (BN); Wall Street Journal (WSJ); Stone & McCarthy Research Associates (SMRA); New York Times (NYT); Financial Times (FT); Market News International (MNI); Globe and Mail; Associated Press (AP); CNW Group (CNW); Reuters; Business News Network (BNN); Market Watch; and others.

Ivan Greenstein, Stephan Buu, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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