– German government bonds are trading modestly lower in NY open Monday, with the 10-year part of the yield curve underperforming, weighed by better than expected Spain, Italy and UK manufacturing PMI. However, volumes were very light as German celebrates Unification Day holiday. Quiet start for Asian hours as China’s week-long National Day holiday began Saturday, Oct. 1 ends Friday, Oct. 7 w/financial markets closed till Monday, Oct. 10. South Korea, Malaysia and Australia out for day as well. Brent crude oil, the international benchmark, is higher by 1.0% at $50.71 a barrel and is on track for its first close above $50 since August 19. West Texas Intermediate crude oil is up 1.0% at $48.72 a barrel. Deutsche Bank CEO John Cryan will be in Washington, DC, for this week’s annual International Monetary Fund meeting, and Frankfurter Allgemeine Zeitung reports that other bank executives are expected to join him to try to hammer out a settlement with the US Department of Justice. Prime Minister Theresa May says the UK will trigger Article 50 before “the end of March next year,” formally beginning its two-year process to leave the European Union. The British pound is down 0.7% at 1.2880.
–S&P 500 Futures Hold Steady After Stocks’ Best Quarter of 2016 (Bloomberg) U.S. stock-index futures were little changed, with investors awaiting economic data as concerns over the health of Deutsche Bank AG subsided. S&P 500 Index contracts expiring in December lost less than 0.1 percent to 2,160 at 7:29 a.m. in New York. The benchmark on Friday rose 0.8 percent as relief swept over equity markets after a report Deutsche Bank may pay less than half the Justice Department’s initial request to settle a probe related to bad mortgages. Dow Jones Industrial Average futures were unchanged at 18,219 today.
–Sterling sinks to three-year low on Brexit, European banks struggle again (Reuters) Sterling slumped to a three-year low against the euro on Monday as Britain set a March deadline to start divorce proceedings from the European Union, while worries over Deutsche Bank and Europe’s banking sector kept share prices in check. British stocks were the standout performers in Europe, lifted to an 18-month high by the pound’s broad and deep weakness and figures showing the fastest rise in UK manufacturing output in more than two years.
–Rising demand drove up September euro zone factory activity: PMI (Reuters) Manufacturing activity in the euro zone picked up last month as demand increased from both within and outside the currency bloc, driving factories to increase headcount, a survey showed on Monday. However, the upturn remained uneven and was centred on Germany and its neighbours. Growth was far weaker than earlier in the year in Spain, Italy and Ireland, while manufacturing in France continued to decline.
–Bank of England confirms will hold broader bank stress test in 2017 (Reuters) The Bank of England said on Monday it would hold a broader stress test of British banks’ resilience alongside its regular annual check-up of their financial health. The central bank will release the results of this year’s stress test at 0700 GMT on Nov. 30, alongside its half-yearly Financial Stability Report, and will go ahead with plans set out in 2015 to conduct a broader test as well in 2017.
–Canadian Investors Didn’t Get the Memo About Weak Global Growth (Bloomberg) The global economy may be stumbling along in one of its weakest patches ever but Canadian investors are wasting no time betting on a resurgence by piling into assets at home and abroad. Signs of optimism abound across every market in Canada, even with annual growth in the world’s 11th-largest economy barely topping 1 percent. Stock valuations in the S&P/TSX Composite Index have surged to the highest in 14 years; mergers reached a record in the third quarter, and investors are soaking up bonds sold by Canadian provinces and companies.
–Calgary office vacancy rates nearing 25 per cent, topping highs set in 1980s recession (Financial Post) Vacancy rates in downtown Calgary, hard hit by the prolonged oil slump and already at historic highs, could be heading to 25 per cent, including in some of the city’s most posh skyscrapers, new reports show. An office report from Barclay Street Real Estate pegs the city’s current downtown vacancy rate at 22.1 per cent, but notes that skyscrapers still under construction could push the rate to 25.6 per cent next year and 26.4 per cent in 2018.
– Janus to Merge With Henderson, Forming Asset Management Giant (NYTimes) Janus Capital Group and Henderson Group said on Monday that they would merge in an all-stock deal that would create an asset manager with greater global scale and about $320 billion of assets under management. The combined company — to be called Janus Henderson Global Investors — would be worth about $6 billion based on market capitalization.
– Overview: US 10yr note futures are down -0.0119% at 131-4, S&P 500 futures are down -0.15% at 2157.25, Crude oil futures are up 0.81% at $48.63, Gold futures are up 0.2% at $1319.8, DXY is up 0.06% at 95.525.
US Economic Data
-9:45 AM: Markit US Manufacturing PMI, Sep F, est. 51.5 (prior 51.4)
-10:00 AM: Construction Spending, m/m, Aug, est. 0.3%(prior 0.0%)
ISM Manufacturing Sep, est. 50.3 (prior 49.4)
ISM Prices Paid, Sep, est. 53.5 (prior 53.0)
Canadian Economic Data
-9:30 AM: RBC Canadian Manufacturing Index, Sep, (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