cti2015header-morning comments web

Market Update

  • US tsys lower after July payrolls surprised to the upside rising 255k vs 188k exp with both May & June revised higher and AHE up 0.3% vs 0.2% exp. Volumes in tsy futures light overnight, flows saw sellers of 5s from foreign CB and Japanese life ins buying of the long end according to MNI. European stocks slightly higher, USD index lower, crude unch, cutting earlier losses and holding close to $42.  German govt bonds lower, curve steeper with long end weighed by profit taking in the long end. GOCs lagging the move lower in tsys as cdn empl disappointed falling 31k vs 10k increase exp, with the unemp rate rising to 6.9% from 6.8% in June. The CAD is sharply lower on the diverging reports – off 140pps at 1.3158. Provis trading down after payrolls, Ont 26 @ 84, Ont 48s @ 96. 10Y spds are ~10 bps narrower over the past month despite a record July for provi (& corp) issuance (~19bln).

 News headlines                                                                          

  • Global Stocks Advance With Metals on Stimulus as Dollar Slips (Bloomberg)  Stocks rose around the world and metals gained on speculation central bank stimulus measures will support the global economy. The dollar weakened before a report forecast to show growth in payrolls slowed to this year’s average pace. Miners led European shares to a third day of gains, while emerging markets extended their weekly advance as negative interest rates in Europe and Japan boost demand for riskier assets. Aluminum and zinc led metals higher. A measure of the dollar fell for the first time in three days and Treasuries were little changed. Vodafone Group Plc was offering the longest-maturity corporate bond in sterling this year after borrowing costs in the currency tumbled the most since May 2009.
  • Oil prices slip as short-covering rally fizzles (Reuters) Oil prices dipped on Friday, ending a two-day rally, as a glut of crude and refined products weighed on markets and investors eyed a possible stutter in China’s imports. U.S. West Texas Intermediate (WTI) crude futures CLc1 fetched $41.74 per barrel at 0930 GMT (0530 ET), down 19 cents from their last close, after trading as low as $41.44 earlier in the day. They were on track roughly to break even on the week.
  • BoE stimulus lifts stocks as U.S. jobs data looms (Reuters) British equities surged to one-year highs on Friday, lifted by the Bank of England’s new stimulus plan, while sterling clambered off one-week lows and the dollar slipped as currency markets positioned for U.S. jobs data.
  • German Factory Orders Slide Amid Dwindling Euro-Region Demand (Reuters) German factory orders unexpectedly declined in June as demand for investment goods from within the euro area slumped in the run-up to Britain’s referendum on European Union membership. Orders, adjusted for seasonal swings and inflation, fell 0.4 percent from May, when they rose a revised 0.1 percent, data from the Economy Ministry in Berlin showed on Friday. That’s the third consecutive month demand remained below economists’ estimates. The median in a Bloomberg survey was for an increase of 0.5 percent. Orders dropped 3.1 percent from a year earlier.
  • ECB Leaves Investors Guessing on Some Banks’ Stress-Test Results (Bloomberg) The European Central Bank is letting a pall of secrecy hang over the health of some of the continent’s banks. While fellow regulator the European Banking Authority published results of stress tests for 51 banks from Banca Monte dei Paschi di Siena SpA to Deutsche Bank AG, the ECB decided against publicly disclosing the outcome of its own parallel test for 56 additional banks. The ECB, the continent’s top banking regulator, instead left it up to lenders whether they made public information on capital levels, loan quality and leverage.
  • Bombardier Posts Wider Than Estimated Loss on C Series Costs (Bloomberg) Bombardier Inc. reported a wider-than-expected second-quarter loss amid rising costs for increased production of the new C Series airliner while managing to burn through less of its cash. The planemaker swung to an adjusted loss of 6 cents a share, according to a statement Friday. Analysts had predicted a loss of 5 cents, according to the average of estimates compiled by Bloomberg. Revenue decreased 6.7 percent to $4.31 billion, compared with an average estimate of $4.18 billion.
  • Canada’s Telus posts higher-than-expected profit (Reuters) Telus Corp T.TO TU.N, one of Canada’s three biggest telecom providers, reported a higher-than-expected quarterly profit, helped by lower operating expenses.
  • Vancouver-based Telus also raised the low end of its full-year consolidated revenue forecast to C$12.78 billion ($9.82 billion) from C$12.75 billion. It maintained the high end at C$12.88 billion.

Overnight markets

  • Overview: US 10yr note futures are down -0.2938% at 132-18, S&P 500 futures are up 0.35% at 2166.75, Crude oil futures are down -0.02% at $41.92, Gold futures are down -0.99% at $1353.9, DXY is up 0.47% at 96.205.

US Economic Data

  • 8:30 AM: Trade Balance, June, -44.5b, est. -43.0b (prior -41.1b, revised -41.0b)
  • Change in Nonfarm Payrolls, July, 255k, est. 180k (prior 287k, revised 292k)
  • Change in Private Payrolls, July, 217k, est. 170k (prior 265k, revised 259k)
  • Change in Manufacturing Payrolls, July, 9k , est. 4.0k (prior 14k, revised 15k)
  • Unemployment Rate, July, 4.80%, est. 4.80% (prior 4.90%)
  • Average Hourly Earnings, m/m, July, 0.30%, est. 0.20% (prior 0.10%)
  • Average Hourly Earnings, y/y, July, 2.60%, est. 2.60% (prior 2.60%)

 Canadian Economic Data

  • 8:30 AM: Int’l Merchandise Trade, June, -3.63b, est. -2.84b (prior -3.28b, revised -3.50b)
    • Unemployment Rate, July, 6.90% , est. 6.90% (prior 6.80%)
    • Net Change in Employment, July,-31.2k, est. 10.0k (prior -0.7k)
    • Participation Rate, July, 65.4%,  (prior 65.5%)
  • 10:00 AM: Ivey Purchasing Managers Index, July, (prior 51.7)



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