07/06/2016

cti2015header-morning comments web

Market update

Tsys opening slightly higher, US 10Y 1.73% (-1bp), below avg volume in TY1 futures. Core Euro bonds mixed, with short end yields higher, longs 1-2bps lower led by German 30Y bunds. Crude 1.1% higher above $50 – crude inventories forecast to have fallen by another 3mln barrels for the week ended June 3rd. S&P futs higher after rising to new The Netherlands sold E4.812bln of new 5Y bonds at -0.233% with an order book of ~E12bln (MNI). The UK sold GBP1.5bln Dec 46 gilts at record low 2.09%, thou with a large 1.5bp tail – long gilt/bund spd ~3bps wider. GOCs are unch, off the lows as stock futures pare gains, provi spds 1bp wider – Ont 46 103/102, Ont 26 92/91. Some selling late yest vs Sinai Health deal (Aa2) ($200mln 40Y @ 164). CPPIB Capital (Aaa/AAA) lauched $1.25bln 3Y at 55 or 23bps over CMBs.

News headlines

  • Stocks Rally With Emerging Markets on Yellen; Pound Advances (Bloomberg) Stocks rallied with emerging markets as investors added to bets that U.S. interest rates will stay lower for longer, keeping growth on track. The MSCI All Country World Index headed for its strongest close since April after Federal Reserve Chair Janet Yellen signaled that officials won’t derail the economy with a premature rate hike. Emerging-market stocks and currencies advanced for a fourth day. The South Korean won surged the most in six years, and the currencies of Australia and India rose after the nations’ central banks kept interest rates unchanged. The pound rose as a poll showed the campaign to keep Britain in the European Union ahead. The Bloomberg Commodity Index halted a four-day gain that had pushed it to a bull market.
  • China forex reserves fall to $3.19 trillion, lowest since Dec 2011 (Reuters) China’s foreign exchange reserves in May fell to $3.19 trillion, central bank data showed on Tuesday, the lowest since December 2011, likely due to the impact of a stronger dollar. Economists polled by Reuters had predicted foreign exchange reserves would fall to $3.20 trillion from $3.22 trillion at the end of April
  • Euro-Area Economy Grows Faster as Consumption Gathers Pace (Bloomberg) The euro-area economy grew faster than previously estimated at the start of the year, driven by investment and a pickup in consumer spending. Gross domestic product rose 0.6 percent in the first quarter, the European Union’s statistics office in Luxembourg, said on Tuesday. That’s the rate Eurostat initially reported on April 29 before revising growth down to 0.5 percent on May 13. After growing at the fastest pace in a year, the European Central Bank predicts the 19-nation economy will slow in the second quarter, with inflation rates likely to remain very low or even negative.
  • Yellen Insists Fed Increase En Route as Focus Moves to September (Bloomberg) June is out. July might be too soon. The Federal Reserve’s next interest-rate increase is coming, but even September isn’t a sure bet. That’s the message investors and economists are taking from Chair Janet Yellen’s remarks Monday. Her comments were the last the public will hear from a Fed official before the central bank’s policy-setting meeting next week. In her remarks, Yellen was clear that she’s fairly sure the economy will improve enough to warrant another interest-rate increase. She also has lingering uncertainties that may take several months to resolve.
  • China, U.S. agree to push for IMF reforms for emerging economies: vice premier (Reuters) China and the United States agreed to push forward reforms at the International Monetary Fund (IMF) to increase quotas for emerging economies, China’s vice premier Wang Yang said on Tuesday. The United States also will fully consider the impact that normalizing monetary policy will have on international markets, he added, at the end of high-level talks between China and the United States in Beijing.
  • Australian dollar jumps 1 percent after shift in tone from RBA (Reuters) The Australian dollar gained more than 1 percent against its U.S. counterpart on Tuesday after the Reserve Bank of Australia kept interest rates on hold and appeared to raise the bar on further monetary easing. The Aussie AUD=D4 climbed to $0.7454, its highest since May 6, and rose 1 percent against the yen and the euro. The RBA kept the cash rate at a record low 1.75 percent at its monthly review, after cutting last month for the first time in a year.
  • Valeant Pharmaceuticals International Inc stock dives after profit misses estimates, forecast cut (Financial Post) Valeant Pharmaceuticals International Inc. cut its 2016 profit forecast as new Chief Executive Officer Joseph Papa starts his attempt to turn around the embattled drugmaker. The shares plummeted in early trading. Earnings will be US$6.60 to US$7 a share, excluding some items, the company said in a statement Tuesday. In March, under former CEO Michael Pearson, Valeant anticipated US$8.50 to US$9.50. Analysts were predicting earnings of US$8.49, the average of estimates compiled by Bloomberg. In the first quarter, earnings of US$1.27 missed analysts’ predictions by 10 cents

 Overnight markets 

  • Overview: US 10yr note futures are up 0.0358% at 130-30, S&P 500 futures are up 0.12% at 2110.75, Crude oil futures are up 1.05% at $50.21, Gold futures are down -0.63% at $1239.6, DXY is up 0.03% at 93.934.

 US Economic Data 

  • 8:30 AM: Nonfarm Productivity, 1Q F, -0.6%, est. -0.6% (prior -1.0%)
    •  Unit Labor Costs, 1Q F, 4.5%, est. 4.0% (prior 4.1%
  • 10:00 AM: IBD/TIPP Economic Optimism Index, June, est. 48.2 (prior 48.7)
  • 15:00 AM: Consumer Credit, April, est.  $ 18.0b (prior $ 29.674b)

Canadian Economic Data 

  • 10:00 AM : Ivey Purchasing Managers Index, May, est. 51.0 (prior 53.1)

 

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
Fax: (514)-861-3230