cti2015header-morning comments web

Market Update

US tsys lower, reversing earlier gains with German bunds after the ‘no’ vote prevailed as expected in Italy’s referendum. US equity futures, higher along with European equities, a decline in the euro to twenty month lows helping exporters. Gold getting hit, falling to a ten month low. US 10Y touched 2.34% briefly in Asia on risk off move after the Italian vote, yet risk markets reversed with core European bonds – the 10Y bund is ~10bps off the early lows at 0.35%. Friday’s non-farm was strong enough to keep the Fed on track for a rate hike next week, today’s ISM non-manufacturing is expected to improve from Oct (the rest of the week is light in terms of data flow. Fed Dudley repeating earlier views that tighter monetary policy is needed over time, and financial conditions have tightened reflecting expecatations of expansionary fiscal policy.  GOCs lower, actually underperforming tsys in the backup – which could be related not only to strength in crude 1% higher above $52.00 but the threat of trade retaliation as highlighted by Trump’s latest ‘tweets’ over the weekend. Provis starting wider after closing last week slightly tighter despite heavy provi/muni supply. Bank supply possible this week after earnings (TD, CIBC..).

News headlines 

Futures up as oil prices top $55 (Reuters) U.S. stock index futures were higher on Monday as oil prices topped $55 a barrel for the first time in 16 months, and investors shrugged off the defeat of a referendum in Italy for constitutional reforms. Futures lost ground slightly on Sunday after Italian Prime Minister Matteo Renzi said he would resign following the rejection. However, world stocks, including Italian shares, reversed course to trade higher on Monday as investors bet against immediate snap elections in the country.

Oil tops $55 for first time in 16 months as OPEC deal fuels buying (Reuters) Brent crude oil prices rose above $55 a barrel on Monday, trading at a fresh 16-month high, on rising prospects of a tightening market after OPEC members agreed on a landmark deal to cut production last week. Monday’s gains take the rally since the agreement was struck on Wednesday to 19 percent for Brent, the highest in almost eight years, and 16 percent for U.S. crude. Brent crude oil futures LCOc1, the global benchmark used to trade oil, soared to their highest since July 2015 to $55.33 a barrel. It last traded at $55.05 a barrel, up 59 cents, or 1.1 percent, at 1133 GMT.

Italy Sinks Into Political Limbo as Defeat Sweeps Renzi Away (Bloomberg) Italy fell into political limbo after Prime Minister Matteo Renzi announced his resignation, with rival parties jockeying to fill the power vacuum following his crushing defeat in a constitutional referendum. Financial markets reversed initial sell-offs as investors came to terms with Renzi’s impending departure. The premier is preparing to hand in his resignation to President Sergio Mattarella on Monday afternoon having signaled that he won’t stay on to help stabilize a caretaker administration.

Euro rebounds after hitting 21-month low on Italian referendum defeat (Reuters) The euro rebounded from 21-month lows on Monday, clawing back almost all the ground it had lost overnight after Italian Prime Minister Matteo Renzi conceded defeat in a referendum on plans to reform the country’s constitution and said he would resign. The single currency tumbled as much as 1.4 percent in Asian trade to hit $1.0505 EUR=, its weakest since March 2015, as investors worried about increased political uncertainty in the euro zone. But by 0855 GMT it had recovered almost all of those losses, trading down 0.1 percent on the day at $1.0650.

Army Blocks Drilling of Dakota Access Oil Pipeline (NY Times) The Standing Rock Sioux Tribe won a major victory on Sunday in its battle to block an oil pipeline being built near its reservation when the Department of the Army announced that it would not allow the pipeline to be drilled under a dammed section of the Missouri River. The Army said it would look for alternative routes for the $3.7 billion Dakota Access pipeline. Construction of the route a half-mile from the Standing Rock Sioux reservation has become a global flash point for environmental and indigenous activism, drawing thousands of people out here to a sprawling prairie camp of tents, tepees and yurts.

UK Supreme Court to hear historic Brexit case (TheGuardian) The government of Prime Minister Theresa May will on Monday seek to overturn a ruling that it must obtain parliamentary approval before triggering Brexit, in a highly-charged case in Britain’s highest court. For the first time ever, all 11 Supreme Court judges will convene for the four-day hearing which threatens to upset May’s timetable for leaving the European Union.

Overnight markets                                                                     

Overview: US 10yr note futures are down -0.2385% at 124-6, S&P 500 futures are up 0.39% at 2200.5, Crude oil futures are up 0.66% at $52.02, Gold futures are down -0.86% at $1167.7, DXY is down -0.12% at 100.65, CAD/USD is up 0.04% at 0.7522.

US Economic Data 

9:45 AM Markit US Service PMI, Nov F, est. 54.8 (prior 54.7)
Markit US Composite PMI, Nov F (prior 54.9)
10:00 AM Labor Market Condition Index, est. -0.2 (prior 0.7)
ISM Non-Manufacturing Composite, Nov, est. 55.5 (prior 54.8)

Canadian Economic Data 

There is no major economic data release 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