Market Update
Tsys lower, curve 2bps steeper with the 10Y above 2.40% for the first time since July 2015 as crude rises over $50 after OPEC decided to cut production yest, its first cut in eight years. Tsys pressured since Asia trading, brief reprieve ~4:00AM. German bunds lower, underperforming tsys in the downtrade, bund curve steeper weighed by sov supply from Spain & France also better than exp German & Italy PMIs. GOCs lower, yields 3-5bps higher led by the 10Y @ 1.63% highest since last Nov. Provis opening 0.5bps tighter after ending the month 0.5bps wider which in the context of 3 provi & 2 muni deals for $1.44bln is not bad. Alberta, periph spds benefitting from rise in crude, Alta/Ont 46 11.5/11 tightest in a month. TD Q4 eps matched exp ($1.22), thou PCLs were lower, CIBC beat est $2.60 vs $2.48, lower PCLs, raised its dividend $1.24 from $1.21.
News headlines
Global Bonds Suffer Worst Monthly Meltdown as $1.7 Trillion Lost (Bloomberg) The Bloomberg Barclays Global Aggregate Total Return Index lost 4 percent in November, the deepest slump since the gauge’s inception in 1990. Bonds in Europe extended declines with their U.S. peers as OPEC’s agreement on Wednesday to cut oil production added to prospects of higher inflation. The reflation trade has been driving markets since Donald Trump’s presidential election win due to promises of tax cuts and $1 trillion in infrastructure spending. All this has prompted investors to dump debt that was offering near-record-low yields and pile into stocks.
Dollar Slips Before Jobs Data as Oil Trades Near $50; Bonds Drop (Bloomberg) Financial markets started the month on an uncertain footing after a dramatic November, with the dollar retreating from a nine-month high, Treasuries falling and European stocks snapping a two-day advance. The U.S. currency declined against most of its 16 major peers before a payrolls report on Friday, while a measure of euro volatility jumped to the highest since before the Brexit vote as investors brace for Italy’s referendum and Austria’s presidential election on Dec. 4 and the European Central Bank’s policy decision in a week’s time. The slump in Treasuries extended the biggest climb in 10-year yields since 2009. European stocks fell with U.S. equity-index futures, while oil advanced after a more than 9 percent rally on Wednesday.
Jobless claims rise to five-month high (Reuters) The number of Americans filing for unemployment benefits rose more than expected last week, hitting their highest level in five months, but the underlying trend remained consistent with a strengthening labor market. Initial claims for state unemployment benefits increased 17,000 to a seasonally adjusted 268,000 for the week ended Nov. 26, the Labor Department said on Thursday. That was the highest level since June and marked the second straight week of increases.
UK factory growth cools as weak pound fuels cost pressures: PMI (Reuters) British manufacturing growth cooled unexpectedly in November as factories grappled with soaring costs caused by sterling’s slump after June’s Brexit vote, even before this week’s jump in oil prices. Thursday’s Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) also suggested the weak pound failed to boost exports by as much as in previous months.
CIBC hikes dividend as 20% profit jump beats expectations (Financial Post) Canadian Imperial Bank of Commerce, Canada’s fifth-biggest lender, reported a better-than-expected quarterly profit, driven by strong performance in its capital markets business. The company said the unit gained from higher equity trading and underwriting revenue, as well as a rise in financing activity in the fourth quarter. Net income from capital markets business surged 52.5 per cent to $276 million in the quarter ended Oct. 31.
TD Bank earnings rise on strong U.S. growth (Financial Post) Toronto-Dominion Bank, Canada’s second-biggest lender, on Thursday reported a rise in fourth-quarter earnings, in line with market expectations, driven by strong growth at its U.S. retail business. The bank said its earnings rose to $1.22 per share in the fourth quarter to Oct.31, up from $1.14 in the same period the year before, matching the average forecast by analysts according to Thomson Reuters I/B/E/S.
Overnight markets
Overview: US 10yr note futures are down -0.2761% at 124-6, S&P 500 futures are up 0.11% at 2201.25, Crude oil futures are up 2.35% at $50.6, Gold futures are down -0.1% at $1172.7, DXY is down -0.33% at 101.17, CAD/USD is down -0.41% at 0.7473.
US Economic Data
| 8:30 AM | Initial Jobless Claims, Nov 26th, 268k, est. 253k (prior 251k) |
| Continuing Claims, Nov 19th , 2081k, est. 2033k (prior 2043k) | |
| 9:45 AM | Markit US Manufacturing PMI, Nov F, est. 53.9 (prior 53.9) |
| 10:00 AM | Construction Spending, m/m, Oct, est. 0.6% (prior -0.4%) |
| ISM Manufacturing, Nov, est. 52.5 (prior 51.9) | |
| ISM Prices Paid, Nov, est. 54.5 (prior 54.5) | |
| Wards Domestic Vehicle Sales, Nov, est. 14.00m (prior 14.05m) | |
| Wards Total Vehicle Sales, Nov, est. 17.70m (prior 17.90m) |
Canadian Economic Data
| 9:30 AM | RBC Canadian Manufacturing Index, Nov, (prior 51.1) |
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.
Tel : (514)-861-0240
Fax: (514)-861-3230