Market update
US tsys opening weaker on low volume in tsy futs, US 10Y 1.72 (+3bps) as European equities rise, Nikkei up for second day and crude sharply higher (3.8%). Core Euro bonds lower/ steeper, 10Y bund yield 3bps higher on ‘risk on’ and better than exp rise in German exports. JPY lower for the first time in six days, BOJ member saying rapid moves in Yen undesirable. GOCs lower as 10s are +5bps on the curve after March employment came in at 40.6K vs 10K exp – almost entirely on rise in full-time (35K) with the unemployment rate flaling to 7.1% from 7.3%. Provis better bid (0.5bps) after 8:30 data – Ont 26 98.5/98, Ont 46 109/108, QC 48 112.5/111.5.
News headlines
- Stocks up as investors look to end bruising week on a high (Reuters) Stocks and bond yields rebounded on Friday but were still firmly on track to end lower over the course of a bruising and volatile week marked by the Japanese yen’s surge against the dollar. Europe’s FTSEurofirst 300 .FTEU3 was up 0.7 percent in early trading, lifted by energy shares thanks to a sharp rise in crude oil prices, but will likely notch up its fourth straight weekly decline. That would be its longest losing streak since October 2014.
- Yen stalls as finance minister warns on intervention (Reuters) Gains for stock markets and a warning of possible intervention from Japan’s finance minister knocked back the yen on Friday after a week of startling gains. The yen surged at one point by as much as 2 percent against the dollar on Thursday, and Minister Taro Aso responded early on Friday by warning rapid currency moves were « undesirable, » that the yen’s were « one-sided » and that Japan would take steps as needed.
- Oil prices rise on optimism over end of punishing glut (Reuters) Oil prices rose on Friday, lifted by fresh hopes over a proposed freeze in oil production and firm economic indicators from the United States and Germany that cast a positive light on growth in fuel demand. Russia’s oil production could fall in April, sources said, while the country’s energy minister expressed hopes that producer nations could agree to an output freeze at a meeting in Doha later this month. Front-month U.S. West Texas Intermediate (WTI) crude futures were trading $1.33 higher at $38.59 per barrel at 0954 GMT, more than 3 percent above their last close. International Brent futures were up $1.30 at $40.73 a barrel.
- Treasuries Set for Two-Week Gain; Greenspan Warns of Global Risk (Bloomberg) Treasuries headed for their biggest two-week gain since January as the Federal Reserve warned the global economy presents heightened risks. U.S. government securities have returned 1.3 percent in the period, the biggest back-to-back weekly run since the period ended Jan. 15, based on Bloomberg World Bond Indexes. The Japanese yen has surged 11 percent this year, the most among the 16 most-traded currencies against the dollar, highlighting demand for perceived haven assets.
- Yellen, alongside Fed alum, says rate hikes on track (Reuters) The U.S. economy is on a solid course with some hints of inflation so the Federal Reserve is on track for further interest rate hikes, Federal Reserve Chair Janet Yellen said on Thursday in a defense of her decision to tighten policy late last year. In a rare spectacle, Yellen spoke on a New York panel alongside her three predecessors who ran the world’s most powerful central bank. She said that, seven years after the brutal financial crisis, the U.S. labor market was now « close » to full strength, again arguing that inflation would not be held down much longer by the strong dollar and low oil prices.
- China says G20 summit should be about economics, not politics (Reuters) The G20 summit to be hosted by China this year should be about economics and not political issues like territorial disputes, China’s foreign minister said on Friday, firing a warning shot ahead of the country’s biggest diplomatic event of the year. The summit, expected to be held in early September in the eastern Chinese city of Hangzhou, will gather major world leaders together like Chinese President Xi Jinping and U.S. President Barack Obama.
- Cameron Accused of Hypocrisy for Stake in Father’s Offshore Fund (Bloomberg) U.K. Prime Minister David Cameron was accused of “hypocrisy” after he said he held a stake in an offshore fund set up by his late father until six years ago, an admission broadcast on national television following four days of questions over the investment. The premier gave in to intense pressure to give details of his interests in the Blairmore Holdings Inc. fund after it was mentioned in reports that emerged Sunday following the leak of millions of documents from a Panamanian law firm detailing attempts to avoid tax.
- U.S. says China internet censorship a burden for businesses (Reuters) The United States has labeled China’s internet censorship a trade barrier in a report for the first time since 2013, saying worsening online restrictions are damaging the business of U.S. companies. Since Xi Jinping became China’s president that year, the U.S. had not listed China’s so-called Great Firewall as a trade impediment despite widespread outcry that the online blocks limit access to crucial information, email and search services such as those found on Google’s platform.
- Bond Managers Beware! Index Funds Are Coming for Your Money, Too (Bloomberg) If you’re a bond manager, you may think index funds are the headache of your stock-picking colleagues. Think again. U.S. managers tracking indexes oversaw a record 27 percent of the money in taxable-bond mutual funds and exchange-traded funds as of Feb. 29, compared with 20 percent at the end of 2013, according to Morningstar Inc. While the proportion is smaller than the roughly 40 percent of equity-fund assets in passive products, the trend and the reasons — cost savings and a poor performance of active managers on average — are similar.
- Foreign money is flowing into Canadian condominiums, raising concerns about market vulnerability (Financial Post) Fresh data on foreign ownership of condominiums in Toronto from Canada Mortgage and Housing Corp. points to an upswing in offshore money making its way into the country’s largest city. For the first time, the Crown corporation broke down offshore investment by the age of the buildings and it’s becoming increasingly clear that, as every new high-rise condominium goes up, so does the percentage of foreign owners.
- Greek consumer prices fall 0.7 pct y/y in March, back in deflation (Reuters) April 8 Greece’s annual EU-harmonised inflation rate turned negative in March after a positive reading in February, statistics service data showed on Friday. The reading in March was -0.7 percent after 0.1 percent in February. Consumer prices were led lower by apparel, footwear, housing, durable goods and transportation costs. Economists polled by Reuters were expecting a zero EU-harmonised inflation rate in March.
Overnight markets
- Overview: US 10yr note futures are down -0.2381% at 130-30, S&P 500 futures are up 0.82% at 2051.75, Crude oil futures are up 5.15% at $39.18, Gold futures are down -0.26% at $1234.3, DXY is up 0.05% at 94.526.
US Economic Data
- Wholesale Inventories MoM variation will be released at 10:00 AM
Canadian Economic Data
- Housing start number came in at a level of 204.3k, stronger than expected and down from prior month
- Unemployment Rate percentage is 7.1%, much stronger than expected, and down 0.2% from prior month
- Net Change in Employment number came in at a level of 40.6k, much stronger than expected and up from prior month
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