Market update
US Tsys higher, curve flatter, US 10Y 2.17 (-5bps) on weak China data (See above), lower global equities. Crude oil ~3% lower @ 47.60, still only retracing a fraction of yest $6 rally on talk Saudi weighing production cuts. Latest JPM Tsy Client Survey showed fewest shorts since net shorts among all clients since Feb 23 15. Core EU bonds higher led by 10Y gilts (~4bps). In Canada, GOCs are higher lagging the move in tsys after Q2 GDP surprised to the upside – falling 0.5% vs -1.0% exp, curve 3bps flatter, longs, lagging with 10/30 +1.5bps @ 75.5. Provis opening 0.5-1.0 bp wider on the bid, long Onts 100.5/99.5 – provis unbale to capitalize on yest pullback in yields, thou long Ont issue at the top of the mkt weighed.
News headlines
- China Factory Gauge Slips to Three-Year Low in August (WSJ) China got another poor picture of its economic health on Tuesday, as an official gauge of manufacturing activity in August slumped to a three-year low while the usually strong services sector showed new weakness.
- Charting the Market: New Month, Same China (Bloomberg) China continues to dictate the mood of markets. On Tuesday, Asian and European stocks resumed where they left off in August after China’s official factory gauge fell to a three-year low. The report suggests the world’s second largest economy has yet to find a bottom.
- Oil falls on weak China factory data (Reuters) Oil prices fell sharply on Tuesday after official data showed China’s giant manufacturing sector, one of the main engines powering the world’s biggest energy consumer, contracted at its fastest pace in three years.
- Euro zone factory growth eases in August despite modest price rises – PMI (Reuters) Euro zone manufacturing growth eased last month, despite factories barely raising prices, adding to the European Central Bank’s woes as it battles to spur expansion and inflation, a survey showed.
- High-frequency traders: bond market scourge or saviour? (FT) Depending on who you speak to, high-frequency traders are either the scourge of the US Treasury market, contributing to volatile price movements, or its saviour as banks make a broad retreat.
Overnight markets
- Overview: IG24 5Y 83.75/84.25 (+2.25), US 10yr note futures are up +0.31% at 127-14+, S&P 500 futures are down -2.26% at 1924.75, Crude oil futures are down -3.50% at 47.48, Gold futures are up +0.62% at $1139.5, DXY is down -0.15% at 95.678.
- US BANK CDS (5yr): BAC 81/85 (+1), GS 97/101 (+1), MS 90/94 (+2), C 91/95 (+0), JPM 81/85 (+1), WFC 58/62 (+1)
US Economic Data
- Markit US Manufacturing PMI (Preliminary) is forecast at 52.9 in August, equal to preliminary report.
- ISM Manufacturing is forecast at 52.5 in August versus July 52.7.
- Construction spending is forecast at 0.6% MoM in July versus 0.1% in June.
- IBD/TIPP economic optimism is forecast at 47.1 in September 0.2 point higher than August (46.9).
- Total vehicle sales are expected at 17.30M in August lower than July 17.46M.
Canadian Economic Data
- GDP MoM in June increased 0.5% MoM (+0.6% YoY) compared to -0.2% MoM (+0.5% YoY) in May.
- RBC Canadian Manufacturing PMI will be released at 9h30am.
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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230