Market update
US tsys sharply higher led by the 5 & 7Y, with the US 10Y 1.816 (-5.7bps) on strong volume with 380K. Tsys bid thru the o/n session on lower equities &oil as well as a surprise rate cut from the RBA. China April Manuf PMI fell to 49.4, the 14th month below 50 signaling contraction. European stocks lower led by financials on earnings miss from UBS, Commerzbank with the latter down ~9% as Q1 profit fell 50% on lower interest rate margins. Fed Lockhart saying June is a ‘live meeting’, two rate hikes this year ‘certainly possible’. Latest JPM showed clients increase net shorts to the highest level since mid-March for the week ended May 2nd. GOCs opening well bid, spds 1bp tigther vs tsys, prices likely to be dictated by equities & supply which looks less likely given provi spds `1bp wider to start.
News headlines
- Global stocks slide as yen, euro gains question policy potency (Reuters) The U.S. dollar slid to its lowest against major currencies in well over a year on Tuesday, a move led by the yen’s continued march higher as investors grew doubtful about central banks’ ability to boost growth through aggressive policy easing. That did not stop Australia’s central bank surprising markets by cutting interest rates to a record low of 1.75 percent, however, hitting the currency but lifting the country’s shares.
- S. Index Futures Signal Stock Losses as AIG Drops on Earnings (Bloomberg) U.S. stock-index futures fell, indicating equities will resume losses after Monday’s rebound, as investors assessed earnings. American International Group Inc. fell 3.3 percent in premarket New York trading after the insurer posted a third straight unprofitable quarter on losses from hedge funds and declines in the value of other investments. Mylan NV rose 5.4 percent after the drugmaker forecast profit growth of about 16 percent this year.
- Euro Set for Longest Run of Gains Since 2013 as Fed Focus Fades (Bloomberg) The euro advanced, headed for its longest winning streak against the dollar since 2013, amid signs the Federal Reserve will delay raising interest rates. Europe’s shared currency strengthened, and it earlier breached $1.16 for the first time since August, even as the European Commission Tuesday cut its inflation forecast and warned of slower-than-predicted growth across the 19-nation bloc. The dollar declined as traders lowered expectations for a rate increase by the Federal Reserve by June to 12 percent, from 21 percent on April 27, as reflected in futures.
- German Bonds Advance as EU Cuts Euro-Area Inflation Outlook (Bloomberg) Germany’s government bonds climbed as the European Commission cut its inflation forecast for the euro region by more than half, bolstering speculation that the European Central Bank will increase stimulus. Euro-region sovereign securities advanced as the Brussels-based commission also warned of slower-than-predicted growth across the 19-nation bloc. Inflation in the region will average 0.2 percent this year, the commission said Tuesday. That’s down from the 0.5 percent predicted in February.
- Australia cuts interest rates to turn back global deflation tide (Reuters) Australia’s central bank cut interest rates to an all-time low of 1.75 percent on Tuesday, the first easing in a year as it seeks to restrain a rising currency and stave off the creeping curse of deflation. The Reserve Bank of Australia’s (RBA) quarter-point cut sent the local dollar down more than one U.S. cent to $0.7567 as markets wagered a further move to 1.5 percent was now likely. Australia is just the latest in the Asian region to feel the chill of deflation as too many goods chase too little demand. Singapore surprised many by easing last month, and it followed India, Taiwan, Indonesia, China, Japan and New Zealand.
- China April factory activity contracts again, more layoffs – Caixin PMI (Reuters) Activity at China’s factories shrank for the 14th straight month in April as demand stagnated, forcing companies to shed jobs at a faster pace, a private survey showed on Tuesday, adding to questions over whether the world’s second-largest economy is recovering. The Caixin/Markit Manufacturing Purchasing Managers’ index (PMI) fell to 49.4 last month, below market expectations of 49.9 and recoiling slightly from March’s 49.7.
- Encana posts bigger-than-expected loss as production falls (GlobeAndMail) Canadian oil and gas producer Encana Corp posted a bigger-than-expected quarterly loss due to lower production amid a steep fall in oil prices. The company’s total production fell by 11 per cent to 383,400 barrels of oil equivalent per day in the first quarter ended March 31. Calgary-based Encana’s cash flow, an indicator of its ability to pay for new projects and drilling, fell 79.4 per cent to $102-million.
- BCE to buy Manitoba Telecom for $3.1-billion (GlobeAndMail) BCE Inc. is continuing its years-long acquisition spree with a $3.1-billion deal to acquire Manitoba Telecom Services Inc., a move that will buy some extra growth for the dividend-focused company. The latest transaction comes at a time when the market for wireless subscribers is increasingly mature, with Canada’s main players – BCE, Rogers Communications Inc. and Telus Corp. – fighting hard to maintain existing customers.
Overnight markets
- Overview: US 10yr note futures are up 0.4457% at 130-9, S&P 500 futures are down -0.61% at 2061.5, Crude oil futures are down -1.16% at $44.26, Gold futures are up 0.36% at $1300.5, DXY is down -0.19% at 92.451.
US Economic Data
- 9:45 AM : ISM New York, April, (prior 50.4)
- 10:00AM : IBD/TIPP Economic Optimism Index, May, est. 46.5, (prior 46.3)
- Wards Domestic Vehicle Sales, April, est. 13.40m (prior 12.97m)
- Wards Total Vehicle Sales, April, est. 17.40m (prior 16.46m)
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