Market Update
- US tsys are trading higher with the long end outperforming following the BOE monetary stimulus – a 25bp rate cut and QE of 70bln consisting of 60bln in gilts & 10bln in corporate bonds. UK gilts are 6- 12 bps lower in yield with the curve 5bps flatter led by the 8-10 yr sector. Short sterling futures also saw large buying in the minutes after the BOC decision with the curve 3bps flatter implying easing to zero as soon as the Dec meeting. European/UK stocks reacting favorably – the FTSE up 1.5% led by banks & insurers. GOCs higher, ~1bp flatter, yields 1-2bps lower in line with the muted rally in US tsys. Provis opening tighter, rumlurs of Ont & alberta 10Y.
News headlines
- Pound Retreats as BOE Cuts Interest Rates; European Stocks Rise (Bloomberg) The pound slid against its major peers as the Bank of England cut its key rate for the first time in more than seven years. Stocks rose in Europe and Asia as oil clung to most of the gains from Wednesday’s rally. Currency traders had braced for the BOE to provoke share price swings — a measure of overnight volatility for sterling against the dollar was near the highest since Britain voted to leave the European Union in June.
- BOE Cuts Rate to 0.25% With More QE to Fight Brexit Fallout (Bloomberg) The Bank of England cut its key rate for the first time in more than seven years and will restart the printing presses as it ramps up defenses against a Brexit-induced slump. Officials, led by Governor Mark Carney, slashed their growth forecasts by the most ever and voted unanimously to reduce the benchmark by 25 basis points to a record-low 0.25 percent. While saying they had scope to do more if needed, including taking the key rate close to zero, they also announced a plan to lend as much as 100 billion pounds ($132 billion) to banks to ensure the measures reach the real economy.
- Oil up 3 percent on big U.S. gasoline draw; WTI back above $40 (Reuters) Oil prices jumped more than 3 percent on Wednesday, with U.S. crude futures returning to above $40 a barrel, after a larger-than-expected gasoline draw offset a surprise build in crude stockpiles in the No. 1 oil consumer. U.S. crude inventories rose for a second week in a row, gaining 1.4 million barrels last week, compared with analysts’ expectations for a decrease of 1.4 million barrels, Energy Information Administration (EIA) data showed.
- S. small business borrowing rose in June: PayNet (Reuters) U.S. small business borrowing rose in June, data released on Thursday showed, but not enough to reverse three straight months of decline, pointing to sluggish economic growth ahead. The Thomson Reuters/PayNet Small Business Lending Index rose to 138.9 in June, from May’s upwardly revised 131.1. It was down 5 percent from a year earlier, as borrowing by companies in all major industry groups sagged.
- Greenspan Put Gone Wild as Critics See Markets Hamstringing Fed (Bloomberg) It’s the Greenspan put gone wild. Or so the Federal Reserve’s critics would have it. No longer is the Fed just waiting for financial markets to be hit by a bout of turbulence and then lowering interest rates in response — as former Chairman Alan Greenspan did. Instead, the critics contend, it’s become so sensitive to the risk of sharp market moves in the future that it’s pulling its policy punches now by repeatedly holding off on raising rates.
- FCA Canada Inc’s sales plunge 14% in July as plateau fears grip industry (FinancialPost) FCA Canada Inc.’s sales plunged 14 per cent in July as the company adopted a new way of counting its transactions following a reporting scandal south of the border. The decline was led by a 63 per cent drop in Fiat-brand vehicles and a 31 per cent drop in Chrysler-brand vehicles. Excluding fleet sales, the overall decline was 16 per cent.
- Canadian Tire profit beats as sports gear, apparel sales rise (Reuters) Retailer Canadian Tire Corp Ltd CTCa.TO reported a better- than-expected quarterly profit as sales of sports gear and apparel rose. Revenue from the company’s Canadian Tire retail stores rose 4.5 percent to C$1.91 billion ($1.46 billion) in the second quarter ended July 2. The business accounted for more than half of the company’s total revenue.
Overnight markets
- Overview: US 10yr note futures are up 0.1768% at 132-26, S&P 500 futures are up 0.1% at 2159.25, Crude oil futures are down 0% at $40.83, Gold futures are up 0.27% at $1368.4, DXY is up 0.15% at 95.708.
US Economic Data
- 8:30 AM: Initial Jobless Claims, July 30th, 269k, est. 265k (prior 266k)
- Continuing Claims, July 23th, 2138k, est. 2130k (prior 2139k, revised 2144k)
- 9:45 AM: Bloomberg Consumer Comfort Index, July 31th (prior 42.9)
- 10:00 AM: Factory Orders, June, est. -1.9% (prior -1.0%)
- Factory Order Ex Trans, June, est. -0.2% (prior 0.1%)
- Durable Goods Orders, June F, est. -4.0% (prior -4.0%)
- Durables Ex Transportation, June F, est. -0.4% (prior -0.5%)
Canadian Economic Data
- There is no major economic news 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