cti2015header-morning comments web

Market Update

Tsys rebounding from earlier losses on news ECB will not grant Monte Paschi’s requests for more time to raise capital boosting the likelihood of a state bailout. US 10Y 2.404% after hitting 2.44% in NA trading. Core Euro bonds also pairing losses, 10Y bund 6bps lower @ 0.325%, bunds also supported by disappointing French ind production and German trade balance. UK gilts lagging, longs weighed by BOE survey showing inflation expectations jumped the most in six years. Next week supply picks up both in Europe and the US – the US auctions 3, 10Y and 30Y bonds for $56bln. The last 10 & 30Y auctions came in the wake of the Trump victory and were poorly received yet yields are ~50bps higher, yet with the FOMC scheduled for next Wednesday alongside Nov inflation data, successful takedown of supply is not a given. GOCs lower, curve at new wides 2s/10s +3bps @97bps with the GOC 10Y approaching 1.70% high from last Thursday. Provis did better yest after the QC 10Y issue, are opening unch this morning.

News headlines 

Futures rise as ‘Trump rally’ rolls on (Reuters) U.S. stock index futures edged up on Friday, indicating that investors were still eager to buy into the post-election rally that has propelled a host of Wall Street indexes to record highs. The “Trump rally” has been running for the past month as investors bet President-elect Donald Trump’s policies will boost economic growth and inflation. The three main U.S. indexes closed at record levels for the second day in a row on Thursday, while the small cap Russell 2000 and the Dow Transport .DJT hit all-time highs.

Oil Advances as European Stocks Extend Gains; Korean Won Slides (Bloomberg) Oil rose for a second day on signs producers are following through with agreed production cuts while most other financial markets took a breather from a rally that has propelled European stocks to their biggest weekly gain since February. Oil rose for a second day on signs producers are following through with agreed production cuts while most other financial markets took a breather from a rally that has propelled European stocks to their biggest weekly gain since February.

UK trade deficit narrows more than expected in October, construction falls (Reuters) Britain’s trade deficit narrowed more than expected in October after big upward revisions to previous months following an error in how trade in gold was recorded, official figures showed on Friday. Construction output fell slightly on the month and in the three months to October continued its downward trend, the Office for National Statistics said, bucking more positive signs in some industry surveys.

Trump Says China Will Have to Play by Rules Under New Ambassador (Bloomberg) U.S. President-elect Donald Trump vowed that China would soon have to “play by the rules,” as Chinese state media issued its clearest warning yet about its bottom line on Taiwan. “China is responsible for almost half of America’s trade deficit,” Trump said at a rally Thursday evening Des Moines, Iowa. “China is not a market economy … they haven’t played by the rules, and they know it’s time that they’re going to start. They’re going to start. They’re going to.”

Exclusive: ECB rejects Monte Paschi’s request for more time to raise cash – source (Reuters) The European Central Bank has rejected a request by ailing Italian lender Monte dei Paschi di Siena (BMPS.MI) for more time to raise capital, a source said on Friday, in a move that piles pressure on the Italian government to bail out the bank. The country’s third-largest lender, and the world’s oldest, had asked for a three-week extension until January 20 to try to wrap up a privately funded, 5 billion euros ($5.3 billion) rescue plan in the face of fresh political uncertainty.

Trudeau’s Pipeline Approval, OPEC Deal Resurrect the Oil Sands (Bloomberg) Canadian oil sands producers are finally ready to grow again as Cenovus Energy Inc. and Canadian Natural Resources Ltd. announce they are pushing ahead with expansion projects two years into the worst crude slump in decades. Cenovus said Thursday that the company will proceed with its 50,000 barrel a day phase G expansion at its Christina Lake oil sands site. The announcement comes more than a month after Canadian Natural said it was resuming work on its 40,000 barrel a day Kirby North project.

Overnight markets                                                                     

Overview: US 10yr note futures are down -0.1004% at 124-13, S&P 500 futures are up 0.11% at 2245, Crude oil futures are up 1.06% at $51.38, Gold futures are down -0.26% at $1169.4, DXY is up 0.36% at 101.46, CAD/USD is down -0.16% at 0.7593.

US Economic Data 

10:00 AM Wholesale Inventories, m/m, Oct F, est. -0.4%, (prior -0.4%)
Wholesale Trade Sales, m/m, Oct, est. 0.7% (prior 0.2%)
University of Michigan Current Condition, Dec P, est. 107.5 (prior 107.3)
University of Michigan Expectations, Dec P, est. 86.0 (prior 85.2)
University of Michigan 1 year inflation, Dec P, (prior 2.4%)
University of Michigan 5-10 year inflation, Dec P, (prior 2.6%)

Canadian Economic Data 

There is no major economic news for today



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