Market Update
US tsys opening slightly lower in follow thru to Friday’s strong July non-farm payrolls, with the US 10Y 1.59 (unch) and the curve slightly steeper out to ten yrs. European stocks higher led by banks, which are higher for the fourth straight day, the Nikkei surged 2.5% led by fin’ls as well.. Euro govt bonds mixed – UK gilts higher as the BOE purchase facility is set to start this week , while German bunds are lower after Ger ind prod surprised to the upside rising 0.8% in June vs 0.7% exp. GOCs modestly higher after outperforming tsys Friday after a very weak Cdn July payroll: -31K with losses concentrated in the full time sector. Can/US ended 6-10 bps tighter across the curve. Provis opening unch, Ont 26s trading down at 84 this morn. Light data this week both sides of the border so bonds likely to key off stocks,Fedspeak etc.
News headlines
- Stock markets and U.S. dollar both climb as ‘risk-on’ mode dominates (Reuters) Stock markets rose on Monday and the dollar extended gains as risk appetite revived following strong U.S. job figures that bolstered expectations of faster growth in the world’s biggest economy. The MSCI All-Country World index .MIWD00000PUS rose 0.4 percent, while the pan-European STOXX 600 index gained 0.2 percent. European stock markets were supported by a broad equity rally on Friday’s payrolls data, and as Europe’s under-pressure banks .SX7P extended gains from lows reached at the end of last month after industry stress-tests showed many of them with relatively weak balance sheets.
- Oil market on path to rebalancing, OPEC monitoring situation – Qatar (Reuters) Qatar’s energy minister, and current OPEC president, said on Monday the oil market is on the path to rebalancing despite the recent decline in global oil prices, adding that OPEC was in continuous talks to stabilise the market. “The recent decline observed in oil prices and the current market volatility is only temporary,” Mohammad bin Saleh al-Sada, Qatar’s minister of energy and industry said in a statement.
- China stocks rise despite weak trade data; Hong Kong up (Reuters) China shares inched up on Monday morning, as a surge in coal stocks and sustained interest in property shares ignited by the Vanke drama offset the impact of worse-than expected trade data. Hong Kong equities rose to eight-month highs, as strong U.S. jobs data on Friday lifted risk appetites globally.
- K. Mortgage Bonds Are the Collateral Damage in Carney’s Stimulus (Bloomberg) Sales of U.K. residential mortgage-backed securities are set to decline, starving investors of highly-rated assets. Bank of England Governor Mark Carney’s exceptional stimulus package will help the U.K. economy ride out the Brexit shock. It won’t help the country’s 77 billion pound ($100 billion) mortgage bond market though. Call it collateral damage: the BOE’s new Term-Funding Scheme, or TFS, — a 100-billion pound program designed to help lower borrowings costs feed through to the real economy — will discourage issuance, according to Bank of America Corp. analysts led by Alexander Batchvarov. Supply of new deals matters because Britain’s residential mortgage-backed securities (RMBS) market is the biggest in Europe and is relied on by investors ranging from pension funds to asset managers as a source of highly-rated paper.
- BOJ board divided on whether monetary easing has limits: July meeting summary (Reuters) Stark divisions in the views of Bank of Japan board members were highlighted on Monday, with some defending unlimited easing of monetary policy and others arguing the BOJ had done enough – to the point of driving big market swings and sapping bond market liquidity. The debate underscores the challenges the central bank face as it attempts to address stagnant price growth and entrenched economic weakness with a dwindling set of policy tools.
- Draghi Jumps Brexit Hurdle to Find Oil Damping Price Outlook (Bloomberg) Whenever Mario Draghi clears a hurdle on his path to higher inflation, a new one appears. Just as the 19-nation economy sends encouraging signals that challenges from Brexit to terrorism won’t derail the modest recovery, a new decline in oil prices is casting a shadow over an expected pick-up in inflation. With growth not strong enough to generate price pressures, the European Central Bank president may have to revise his outlook yet again.
- Allergan’s Profit Beats Estimates as Botox Sales Surge (Bloomberg) Allergan Plc posted second-quarter profit that beat analysts’ estimates as sales surged for its blockbuster wrinkle treatment Botox. Earnings excluding some items were $3.35 a share, the company said Monday in a statement. Analysts surveyed by Bloomberg predicted $3.31 a share. Revenue rose 1.5 percent to $3.68 billion, short of the $3.72 billion average estimate. Allergan, which is based in Dublin but has executive offices in New Jersey, completed the $40.5 billion sale of its generic drugs business to Teva Pharmaceutical Industries Ltd. last week. Chief Executive Officer Brent Saunders has said Allergan plans to use some of the proceeds to pay off debt and buy back shares, though it also will look for “tuck-in deals” that fit its existing lines of business. In April, its $160 billion planned merger with Pfizer Inc. fell through after U.S. regulators introduced rules to limit the tax benefits of the transaction.
Overnight markets
- Overview: US 10yr note futures are down -0.1064% at 132-0, S&P 500 futures are up 0.1% at 2179, Crude oil futures are up 1.84% at $42.57, Gold futures are down -0.22% at $1341.4, DXY is up 0.16% at 96.352.
US Economic Data
- 10:00 AM: Labor Market Condition Index, est. -1.9
Canadian Economic Data
- 8:30 AM: Building Permits, m/m, June, -5.5%, est. 1.5% (prior 1.9%, revised -2.1%)
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