cti2015header-morning comments web

Market update

US tsys slightly higher after ADP came in at 156k vs 195k exp vs, US 10Y 1.80%, curve slightly flatter, on avg volume in TY futures (276K). Crude below $44, European equities lower for a fourth day, USD higher for a second day after a couple of Fed speakers yest suggested a June rate hike is a real possibility, thou softness in the ADP & other data (CITI eco surprise is at a three month low) make a near term rate hike tougher to fathom at this point. GOCs higher , spreads narrower vs tsys after the trade deficit widened to a record in March as exports fell 4.8% the lowest since Jan 14. Provi spds unch to start after yest risk off hammered spds 1.5-2.4bps.

News headlines

  • Stocks Fall With Emerging Markets, Dollar Climbs on Fed Caution (Bloomberg) Stocks declined around the world and emerging-market currencies fell to a one-month low after a Federal Reserve official raised concern investors had become too complacent in their belief that U.S. interest rate raises will stay on hold. Equities gauges in Europe and developing nations fell for a fourth straight day. The dollar extended Tuesday’s recovery from the weakest level in almost a year, while Russia’s ruble tumbled the most in more than a week and Malaysia’s ringgit dropped to the lowest since March. Oil traded below $44 a barrel before stockpile data scheduled for release Wednesday that’s forecast to show a fuel glut is expanding.
  • Dollar Rises From Year Low as Fed Speakers Challenge Rate Bets (Bloomberg) A gauge of the dollar rose from its lowest level in a year after two Federal Reserve officials said an interest-rate increase could be considered next month. The greenback has climbed against its 16 major peers since Monday’s close as Atlanta Fed President Dennis Lockhart called a June rate increase “a real option,” while San Francisco’s John Williams said he would support such a move at the next meeting provided the U.S. economy stayed on track.
  • Oil steadies around $45 after slide, Canada wildfire supports (Reuters) Oil steadied around $45 a barrel on Wednesday as reduced production in Canada’s oil sands region lent support, although expectations U.S. crude inventories will rise further from a record capped gains. Brent crude has fallen more than 7 percent from a 2016 high hit on Friday in response to rising output from the Organization of the Petroleum Exporting Countries <OPEC/O>, signs of economic slowdown in the United States and Asia, and a stronger dollar.
  • S. oil industry bankruptcy wave nears size of telecom bust (Reuters) The rout in crude prices is snowballing into one of the biggest avalanches in the history of corporate America, with 59 oil and gas companies now bankrupt after this week’s filings for creditor protection by Midstates Petroleum MPOY.PK and Ultra Petroleum UPL.NL. The number of U.S. energy bankruptcies is closing in on the staggering 68 filings seen during the depths of the telecom bust of 2002 and 2003, according to Reuters data, the law firm Haynes & Boone and bankruptcydata.com.
  • Fed official raises pressure on ‘too big to fail’ banks (GlobeAndMail) At first glance, Bernie Sanders, the self-described socialist running for president, would seem to have little in common with Neel Kashkari, a former Goldman Sachs banker and Republican who now leads a branch of the U.S. Federal Reserve. But the two men agree on one thing: U.S. banks remain too big to fail and it’s time to do something dramatic about it.
  • Spanish Economy Shows Resilience in April Despite Politics (Bloomberg) The Spanish economy showed fresh signs of resilience in April as unemployment fell more than forecast and a gauge of activity beat expectations while the nation gears up for a June election. Data on Wednesday showed the number of Spaniards without a job dropped by approximately 83,600, exceeding the 81,700 forecast in a Bloomberg News  survey.
  • China’s Stock Suspensions Seen as Obstacle to MSCI Inclusion (Bloomberg) If anything stops MSCI Inc. from including Chinese shares to benchmark indexes in its review, it will be the overuse of trading halts. That’s according to a Bloomberg poll of strategists and fund managers, with 16 of the 23 surveyed naming stock suspensions as a main obstacle to inclusion. Capital controls, government intervention, stock beneficiary ownership and cross-border investment quotas were other common concerns ahead of MSCI’s decision in June, the survey showed.


Overnight markets 

  • Overview: US 10yr note futures are up 0.1319% at 130-15, S&P 500 futures are down -0.67% at 2043.25, Crude oil futures are up 1.17% at $44.16, Gold futures are down -0.23% at $1288.8, DXY is up 0.07% at 93.005.

US Economic Data 

  • 8:15 AM: ADP Employment Change, April, 156k, est. 195k (prior 200k)
  • 8:30 AM: Nonfarm Productivity, 1Q P, -1.0%, est. -1.3% (prior -2.2%)
  • 9:45 AM: Markit US Service PMI, April F, est. 52.1 (prior 52.1)
    • Markit US Composite PMI, April F, (prior 51.7)
  • 10:00 AM: ISM Non-Manf. Composite, April,  est. 54.8 (prior 54.5)
    • Factory Orders, March, est. 0.6% (prior -1.7%)
    • Durable Goods Orders, March F, est. 0.8% (prior 0.8%)
    • Durable Goods Orders, March F, est. -0.1% (prior -0.2%)

Canadian Economic Data 

  • 8:30 AM Int’l Merchandise Trade, March,  -3.41b, est. -1.40b (prior -1.91b)


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