cti2015header-morning comments web

Market Update

Tsys slightly higher, off the o/n lows after Q2 Productivity fell 0.5% vs 0.4% exlow volume overnite in TY futures, prices under pressure since Europe after giving up earlier gains. German 10Y bunds moving lower, curve 1bp steeper and the 10Y bund fut trading below its 30d ma (167.01). BOE member McCafferty said the UK may require more stimulus in the coming months. The 10Y gilt yield fell to a record low 0.592% as the BOE gilt buying program resumed but has since reversed with the yield 0.7bps higher 0.619%. European stocks slightly higher, the Nikkei rose another 0.69%. Ten yr Japan govt futures have retraced lower despite a decent 30Y JGB auction. In Canada, GOCs higher after the 8:30 data. Yesterday Can/US spds closed another 1bp tighter across the curve to the tightest lvls since mid June. Light buying from domestics recently according to Candeal, foreign CB buying part in the overnite session a factor recently. In corps, Pembina priced a 10Y deal at 264.8 which was a blowout (CIBC/RY leads deal) with low fills reportedly and which opened ~7bps tighter. There last 10Y issue priced at 225 in Jan of last yr.

News headlines                                                                                            

  • Futures flat a day after S&P touches record high (Reuters) U.S. stock index futures were little changed on Tuesday as investors looked for market-moving catalysts, a day after the S&P 500 index touched a record intraday high. On Monday, Wall Street closed down in one of its lowest volume trading day this year, after the S&P slipped from its record high as healthcare stocks weighed.
  • China’s slowing wholesale deflation takes pressure off central bank (Reuters) China’s factory price deflation moderated further in July, with prices falling at their slowest pace in two years, taking pressure off the central bank to cut rates as policymakers turn their focus to structural reforms and ballooning credit. A government-led building spree has increased demand for construction materials, but higher prices are also due in part to speculation in China’s commodities futures market, which has pushed up Shanghai rebar futures up by 50 percent this year.
  • Oil Steady as OPEC Discussions Seen Unlikely to Result in Action (Bloomberg) Oil traded near the highest close in two weeks as investors weighed OPEC’s plans to hold informal talks next month. Futures gained 0.4 percent in New York after rising 2.9 percent Monday. Members of the Organization of Petroleum Exporting Countries are in “constant deliberations” on stabilizing the market, said Mohammed Al Sada, Qatar’s energy minister and the group’s president.
  • Pound Tumbles Below $1.30 as Traders Await More Brexit Bad News (Bloomberg) The pound fell below $1.30 for the first time in almost a month as investors prepared for data that will give further clues on the state of the U.K. economy in the wake of the decision to quit the European Union. Britain’s currency dropped for a fifth day and ceded ground to all of its 16 major peers amid speculation the reports, due next week, will show an economy reeling from the Brexit vote on June 23.
  • S. housing agencies would need more taxpayer funds in a crisis: regulator (Reuters) Fannie Mae and Freddie Mac, two government-controlled housing finance agencies, would need a big cash injection to weather another financial meltdown, a government regulator said on Monday. Fannie and Freddie would need as much as $126 billion in taxpayer funds to come through a serious downturn, according to a ‘stress test’ from the Federal Housing Finance Agency.
  • Valeant says to reorganize; maintains full-year forecast (Reuters) Valeant Pharmaceuticals International Inc (VRX.N) (VRX.TO) said on Tuesday it would reorganize, and stood by its full-year forecast, as it attempts to restore investor confidence after facing a storm of criticism over its business practices. The Canadian drugmaker has faced intense political and investor scrutiny in the past year for its steep drug price increases and unorthodox use of a specialty pharmacy.
  • Canadian auto industry faces biggest existential threat since 2009 crisis as labour talks begin (FinancialPost) The Canadian auto industry is facing its biggest existential threat since the 2009 crisis, with the future of at least three plants at risk as autoworkers gear up to begin labour negotiations this week. Unifor, which represents more than 6,000 Canadian autoworkers, will open talks with General Motors of Canada on Wednesday and with Ford Motor Co. of Canada and Fiat Chrysler Automobiles (FCA) Canada on Thursday. The existing contracts expire on Sept. 19 and the union is already talking openly about the possibility of a strike.

Overnight markets 

  • Overview: US 10yr note futures are down -0.071% at 131-31, S&P 500 futures are up 0.08% at 2177.25, Crude oil futures are down -0.53% at $42.79, Gold futures are down -0.19% at $1338.7, DXY is up 0.03% at 96.429.

US Economic Data

  • 8:30 AM: Nonfarm Productivity, 2Q P, -0.5%, est. 0.4% (prior -0.6%)
    •      Unit Labor Costs, 2Q P,  2.0%, est. 1.8% (prior 4.5%, revised -0.2%)
    •      IBD/TIPP Economic Optimism, August, est. 47.3% (prior 45.5)

Canadian Economic Data

  • 8:15 AM: Housing Starts, July, 198.4k, est. 191.0k (prior 218.3k)



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