Market update
US Tsys marginally lower, belly underperforming, futures in line on avg volume with 246K Sep 10Y traded so far this session. Global stocks sharply higher highlighted by a 3.98% in the Nikkei, 1.65% gain in Dax and 1.31% gain in Eurostoxx. E-mini S&Ps were last up 7.5 pts while E-mini Nasdaq was up 23 pts. USD is mixed, higher vs JPY, but lower vs GBP and EUR. US Tsys 10Y opened Tokyo at 1.3663% vs 1.3629% Friday and printed a session low of 1.3562% around midnight then rose to 1.3847%. The Tsy will sell its 1pm ET today $24B 3Y auction, then $20B 10Y reopening Tues and $12B 30Y reopening Wed, totalling $56B.
News headlines
- Global Stocks Gain With Dollar as Investors Count on Stimulus (Bloomberg) Rising stock markets, a weaker yen and a dollar that’s rallying with industrial metals are showing investor confidence that a sprinkling of stimulus may contain the worst effects of Britain’s vote to leave the European Union, without encouraging the Federal Reserve to raise interest rates. The MSCI All-Country World Index rose for a third day and U.S. equity index futures climbed after a better-than-forecast U.S. jobs report at the end of last week brightened the economic outlook. Japanese shares advanced the most since February and the yen fell for the first time in a week after Prime Minister Shinzo Abe’s ruling coalition won a fresh mandate to unleash pro-growth policies after Sunday’s election. Nickel advanced with copper and crude oil fell to less than $45 a barrel.
- Deutsche Bank chief economist calls for 150 billion euros in EU bank bailout-Welt (Reuters) Deutsche Bank’s (DBKGn.DE) chief economist urged the European Union to set up a 150 billion euro ($165.39 billion) rescue fund to recapitalize European banks, German newspaper Die Welt reported on Monday. « We won’t be able to avoid setting up a bigger program to recapitalize banks, » David Folkerts-Landau told the daily in an interview. « European banks can be recapitalized with 150 billion euros, » he added.
- K.’s FTSE 100 Defies Brexit Blues to Head for Bull Territory (Bloomberg) A third day of gains has put the U.K.’s FTSE 100 Index on course to close in bull-market territory. After recovering from its post-Brexit plunge in just four days, the gauge of U.K. megacaps continued its rally, and is now up 20 percent from its February low. A dramatic plunge in the pound has made the gauge’s multinational companies more attractive since the country’s vote to leave the European Union. Analysts have joined investors and strategists in taking note, boosting profit-growth estimates for FTSE 100 members by about 4.5 percent in just over a week, the biggest such upgrade in more than a decade.
- Japan Abe orders new stimulus package after election win (Reuters) Japanese Prime Minister Shinzo Abe ordered a new round of fiscal stimulus spending after a crushing election victory over the weekend as evidence mounted the corporate sector is floundering due to weak demand. Abe did not give details on the size of the package, but Japanese stocks jumped nearly 4 percent and the yen weakened over perceptions a landslide victory in upper house elections now gives him a free hand to draft economic policy.
- Carney Poised to Steady Ship as BOE Mulls Interest Rate Cut (Bloomberg) Mark Carney’s third week managing Britain’s response to the economic shock of Brexit is about to begin. With U.K. politics in disarray after the nation opted to split from the European Union, the Bank of England governor has been leading the charge in offering stability. After boosting liquidity, freeing banks to lend more and signaling a willingness to loosen monetary policy, Carney will in coming days address lawmakers in parliament and oversee the central bank’s first interest-rate decision since the Brexit vote.
- Dividend cuts ‘a last resort’ for banks under severe oil and gas stress: Moody’s (FinancialPost) Severe stress in the oil and gas sector could prompt some Canadian banks to reduce their dividends, but that would be a last resort, according to analysts at Moody’s Investors Service. In a report Monday, the debt-rating agency stress-tested the impact on bank capital of a severe scenario stemming from low oil prices, and concluded that there are a number of steps Canada’s seven largest banks could take to conserve capital before resorting to trimming their dividend payouts.
- Canadian PM says Russia not been ‘positive partner’ on Minsk ceasefire (Reuters) Canadian Prime Minister Justin Trudeau said on Monday that Russia has not been a « positive partner » as regards its obligations in the Minsk ceasefire agreement to end a Russian-backed separatist conflict in eastern Ukraine. On a visit to Kiev, Trudeau also announced $13 million in new humanitarian aid for Ukraine and an increase in the number of Canadian observers for the Organization for Security and Co-operation in Europe (OSCE) in the eastern Donbass region.
Overnight markets
- Overview: US 10yr note futures are down -0.2686% at 133-14, S&P 500 futures are up 0.34% at 2127.75, Crude oil futures are down -0.35% at $45.25, Gold futures are down -0.13% at $1356.6, DXY is up 0.22% at 96.515.
US Economic Data
- 10:00 AM: Labor Market Conditions Index, June, est. 0.0 (prior -4.8)
Canadian Economic Data
- 8:15 AM: Housing Starts, June, est. 189.0k (prior 188.6k)
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