Market Update

 US tsys higher near top of overnight range on avg volume in TY futures (280k). Tsy curve ~1bp flatter led by 10s, longs lagging , 10Y 2.365 9-2.1bps). Oil weaker -0.50 @ 43.72, S&P futs +1.5 pts, DXY slightly higher. Core EGBs  higher, outperforming tsys by 1-2bps, the 10Y bund 0.535%, gilts higher on renewed concerns over Brexit – mkt awaits key data on inflation Wednesday. The latest CFTC COY report (July 3rd)  shows large specs adding to shorts/paring longs across the curve, except 30Y & ultras.  Specs are now the most net long 30Y bonds since Dec 1998. GOCs trading higher in line with tsys, curve slightly steeper, 10Y 1.865% vs high of 1.895% Friday low post Cdn employment.  Provis finished last week at the narrows, ~3bps tighter, Ont 27s 67.5/66.5 – rumours of supply never materialized.

News headlines 

Stocks Buoyant Before Earnings; Oil, Gold Retreat: Markets Wrap (Bloomberg) Stocks rose and the dollar was steady as investors prepare to parse second-quarter earnings for more evidence global economic growth is back on track. Oil traded near the lowest closing price in two weeks.

Oil falls as evidence points to rising global supply (Reuters) Oil fell on Monday, adding to heavy losses at the end of last week due to rising drilling activity in the United States and no let-up in supply growth from both OPEC and non-OPEC exporters. Prices dropped even as OPEC signaled it may widen its production caps to include Nigeria and Libya, whose output has recovered in recent months after being curtailed by years of unrest.

Materials Stocks Set to Shine With Poloz Preparing Rate Hikes (Bloomberg) If Governor Stephen Poloz does the expected and raises Canadian interest rates on Wednesday, it may be time to load up on potash, copper and gold stocks. A review of equity performances following Bank of Canada tightening cycles over the past dozen years shows that materials stocks including Lundin Mining Corp. and Potash Corp. of Saskatchewan Inc. significantly outperform all other sectors of the Canadian market.

China’s June factory price inflation subdued on modest raw materials recovery (Reuters) China’s producer price inflation was unchanged in June and remained well off highs seen earlier this year, amid lingering oversupply issues in the steel sector and as signs of economic weakness weighed on the outlook for prices.

Markets No Longer Make Sense to Macro Managers  (Bloomberg) Financial markets no longer make sense to macro managers like Mark Spindel. After spending three decades focusing on things like economic trends, currency moves, politics and policy, Spindel has been confounded by markets shaped by low volatility, algorithms and more. He finally gave up and closed his nine-year-old hedge fund.

Facing Brexit challenge, Britain’s May vows to fight on (Reuters) Britain’s Theresa May will promise to fight on as prime minister and pursue bold domestic reform despite her diminished authority in a speech this week relaunching her leadership after 12 tumultuous months in power.

Overnight markets 

Overview: US 10yr note futures are up 0.15% at 125-01, S&P 500 futures are up 0.03% at 2423.25, Crude oil futures are down -0.9% at $43.83, Gold futures are down -0.06% at $1209, DXY is up 0.17% at 96.17, CAD/USD is up 0.21% at 0.775.

US Economic Data 

10:00 AM Labor Market Conditions Index, Jun, est. 2.5 (prior 2.3)
3:00 PM Consumer Credit, May, $13.500b (prior $8.197b)

Canadian Economic Data

10:00 AM Bloomberg Nanos Confidence, July 7, (prior 58.4k)

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