cti2015header-morning comments web

Market Update

Tsys trading at top of narrow overnite range, Us 10Y -0.025bps 2.365%, curve flatter with the 2Y lagging. Core European bonds higher, UK gilts outperforming as UK ind production fell 1.3% vs 0.2% exp, the largest monthly decline in eight months. ECB decision tomorrow, also supportive, as the central bank is expected to extend its bond purchase program past March. European equities higher for a third day, 3.8% this week which is the best since Sept. Credit Suisse up 7.1% on news the bank will eliminate 4,200 jobs, will cut $1bln in expenses. Monte Paschi up 9% as Italy is considering a bailout of the bank. Italy CDS 13.6bps tighter. GOCs higher led by the 10Y ~1.5bps better on the curve, BOC decision at 10:00am – futures mkts have basically priced out odds of a rate cut  over the past couple of weeks – but as we pointed out yest in our Cda curve comment the 2Y looks cheap and we expect the curve to steepen further post BOC.

News headlines 

Monte dei Paschi bolsters European stocks, ECB looms (Reuters) European shares followed Asian stocks higher on Wednesday, buoyed by reports Italy would step in to rescue troubled bank Monte dei Paschi and expectations the European Central Bank would extend its bond-buying stimulus scheme this week. Italian government bond yields fell, narrowing the premium investors demand to hold them rather than benchmark German debt, to its tightest for about a month.

China Nov forex reserves fall more than expected to $3.05 trillion, lowest since 2011 (Reuters) China’s foreign exchange reserves fell for a fifth straight month in November and by more than expected to the lowest since March 2011, as authorities struggled to shore up the sliding yuan currency in the face of a relentlessly rising dollar. Reserves fell by $69.06 billion last month to $3.052 trillion, central bank data showed on Wednesday, following a drop of $45.7 billion in October.

U.K. Manufacturing Unexpectedly Drops Most in Eight Months (Bloomberg) U.K. manufacturing output unexpectedly fell the most in eight months in October as pharmaceuticals slumped. The 0.9 percent drop compared with forecasts for a 0.2 percent increase and marked the biggest decline since February. Industrial production fell 1.3 percent, driven by a slide in oil and gas extraction. That was due to a shutdown of Buzzard, one of the U.K.’s biggest fields, the Office for National Statistics said on Wednesday.

Mexico Overtakes Canada as No. 2 U.S. Exporter Ahead of Trump (Bloomberg) Mexico is overtaking Canada as the No. 2 exporter of goods to the U.S. this year, in a sign of how economic ties have deepened between the two countries even as the relationship is being questioned by President-elect Donald Trump. Shipments from Mexico totaled $245 billion in the first 10 months of the year, according to Commerce Department figures released Tuesday, ahead of Canada’s $230 billion. If the trend continues, it would be the first time ever the U.S. bought more imports from its neighbor to the south. The two countries ended 2015 tied in exports to the U.S.

Hudson’s Bay Co looks to cut costs after tough quarter; shares hit all-time low (Financial Post) After a tough third quarter Hudson’s Bay Co. is seeking to cut expenses as the veteran retailer’s shares bottomed out at the lowest point yet since going public for a second time in 2012. Chief executive Jerry Storch said Tuesday the owner of Saks, Hudson’s Bay and Kaufhof in Germany is keen to focus on finding “non-customer facing” efficiencies after the company reported a wider than anticipated loss and a four per cent dip in sales at stores open for more than a year, citing weakness in women’s apparel and luxury retail.

More Canadians are going bust as low interest rates fuel debt binge (Financial Post) A new Equifax Canada report says low interest rates and falling oil prices drove up consumer debt and delinquency rates in the third quarter. The credit reporting agency found that average debt increased by 3.6 per cent to $22,081 in the quarter ended Sept. 30 compared to the same period last year. As of the third quarter, Canadian consumers owed $1.702 trillion compared to $1.587 trillion a year earlier.

Overnight market

Overview: US 10yr note futures are up 0.1381% at 124-21, S&P 500 futures are down -0.1% at 2207.75, Crude oil futures are down -1.14% at $50.35, Gold futures are up 0.3% at $1173.6, DXY is down -0.03% at 100.46, CAD/USD is up 0.03% at 0.753.

US Economic Data 

10:00 AM JOLTS Job Openings, Oct, est. 5500 (prior 5486)
15:00AM Consumer Credit, Oct, est. 18.650b (prior 19.292b)

Canadian Economic Data 

10:00 AM Bank of Canada Rate Decision, est. 0.50% (prior 0.50%)


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