cti2015header-morning comments web

Market update

US tsys little changed after ADP, initial claims with the former on consensus @ 173k. yields ~1bp lower, US 10Y 1.83, volume in TY futures below avg. (235k). ECB left mon policy unchanged, Draghi press conference expected to go into more detail on corp bond purchases scheduled to start next week. Global stocks mostly higher, except the Nikkei which fell 2.3% as Abe failed to detail any new stimulus measures apart from delaying consumption tax increase. Crude slightly lower @ $49.00, Saudi Arabia commenting that prices on the way up, disagreements remain over quotas with Iran. GOCs slightly higher, provi spds another 0.5bps tighter after rallying into the close yest ~2bps. Supply form Ont/Q/Alta likely given June cash flows.

News headlines

  • World stocks hold near one-week low (Reuters) World stocks hovered just off one-week lows on Thursday, dragged down by an earlier 2 percent slump in Japan and lackluster European markets, while concerns over Britain’s future in the EU continued to weigh on sterling. Futures prices signaled a flat to weaker Wall Street open. While European bourses inched into positive territory, gains were capped by investors’ reluctance to take big positions before a meeting of the European Central Bank followed by a 1230 GMT (8.30 a.m. ET) press conference by ECB President Mario Draghi
  • Euro zone producer prices fall unexpectedly in April (Reuters) Euro zone producer prices fell unexpectedly in April, registering the steepest annual decline in more than six years due to sharply lower energy costs, data from the European Union’s statistics office Eurostat showed on Thursday. Eurostat said prices at factory gates in the 19 countries sharing the euro currency dropped by 0.3 percent month-on-month for a 4.4 percent year-on-year decline, the latter the greatest decline since November 2009.
  • Dollar set to rise in coming year, Fed in driver’s seat: poll (Reuters) The U.S. dollar is set to rise over the coming year on revived expectations the Federal Reserve will follow through with an interest rate hike this summer, a Reuters poll showed, but only a slight majority say the rally will be « significant. » In recent weeks, better-than-expected data out of the U.S. have helped Fed officials, including Chair Janet Yellen, to talk the markets into pricing in a rate hike as early as July and pushed the dollar up against major currencies.
  • China’s yuan to weaken further as U.S. dollar rallies, economy cools: Reuters poll (Reuters) The Chinese yuan is expected to weaken around 2.5 percent over the coming year as the dollar rallies on expectations of U.S. interest rate hikes and as China’s central bank sets lower mid-points for its mostly-managed currency, a Reuters poll found. The yuan posted its second-biggest monthly fall on record against the dollar in May, highlighting Beijing’s willingness to allow its currency to weaken and reflecting a resurgent dollar as Federal Reserve policymakers put the prospect of a rate hike on the table as early as this month.
  • Saudi Arabia’s Gesture for OPEC Unity Meets Iranian Resistance (Bloomberg) Saudi Arabia faced resistance from Iran to proposals to restore a production target scrapped at OPEC’s last meeting in December as efforts to build unity were undermined by persistent divisions within the producer group. While Saudi Arabia signaled on Wednesday it’s ready to consider a surprise deal with fellow OPEC members, attempting to mend divisions that had grown so wide many dubbed the organization as good as dead, Iran opposes a group production target.
  • Canadian auto sales slip in May, led by 16.5% drop at GM Canada (Financial Post) Canadian auto sales fell in May for the first time in five months, led by a 16.5 per cent drop at General Motors Canada. Light vehicle sales declined 1.6 per cent in May, the first drop since December 2015, but are still up 5.6 per cent year-to-date, according to data compiled by DesRosiers Automotive Consultants. This year’s May had fewer selling days and one less weekend than it did in 2015.
  • Euro zone inflation likely to rise, could yet fall – PIMCO (Reuters) Inflation in the euro zone is likely to rise gradually but there is a chance that it has not yet touched its low point, Andrew Balls, global fixed income chief investment officer with investment firm PIMCO, said on Thursday. « Our baseline is that we will see a gradual drift higher in inflation, but I don’t think we’ve necessarily seen the low. In the event of a shock there’s a real problem. You start from a bad position, » Balls told reporters.

Overnight markets

  • Overview: US 10yr note futures are up 0.0603% at 129-20, S&P 500 futures are down -0.13% at 2095.25, Crude oil futures are down -0.2% at $48.91, Gold futures are up 0.19% at $1217, DXY is down -0.13% at 95.334.

US Economic Data

  • 8:15 AM: ADP Employment Change, May, 173k, est. 173k (prior 156k, revised 166k)
  • 8:30 AM: Initial Jobless Claims, May 28, 267k, est. 270k (prior 268k)
    Continuing Claims, May 21, 2172k, est. 2150k (prior 2163k, revised 2160k)

 Canadian Economic Data

  • There is no major economic data for today

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