cti2015header-morning comments web

Market update

Tsys slightly higher after weaker PPI/retail sales data, 10Y 1.77 (-1.2bps). Tsys lower in Asia on increase in Chinese exports, lower trade surplus.  USD higher vs Yen on more calls for stimulus. Core Euro bonds higher, bund curve ~3bps flatter reversing Tues decline after Saudi oil deal news and long end supply from France (E9bln 20/50year). GOCs unch before BOC at 10:00EST- 10s firmer on the curve by ~2bps after recent widening had brought the 21030 fly to cheapest lvls since March 11th. Provis opening firmer this morn after tightening 2bps yest on higher all in yields.

News headlines

  • Global Stocks Extend Gains as China Trade Improves, Metals Rise (Bloomberg) The cloud that China cast over financial markets is starting to lift — and that’s a boon for stocks and commodities. After trade data pointed to stronger growth in the world’s second-biggest economy, global equities wiped out the last of this year’s losses, copper and iron ore jumped, and haven assets including the yen and gold retreated. European stocks rose for a fourth day, shares in emerging markets climbed to the highest since November, and China’s equities traded in Hong Kong gained the most worldwide, as the Asian nation’s exports surged
  • Oil prices fall on producer meeting doubts, stronger dollar (Reuters) Oil futures traded lower on Wednesday on concerns that a producer meeting set for Sunday in Doha to discuss freezing output will do little to trim oversupply as well as a strengthening dollar. Brent crude LCOc1 was down 41 cents at $44.28 per barrel at 1049 GMT. It hit a four-month high in the previous session before settling up $1.86. U.S. crude CLc1 declined by 56 cents to $41.61 a barrel after gaining $1.81 a day earlier.
  • Dollar gains, eyes on G20, Bank of Canada (Reuters) The dollar surged to a two-week high against the euro on Wednesday, as a push of oil prices above $40 a barrel and improved data out of China drew investors into riskier bets than low-yielding assets in Europe and Japan. The euro and yen have gained strongly against the dollar in recent weeks as investors sought traditional safe havens for their money on a darkening outlook for banks and economic growth, underlined again by downgraded IMF forecasts on Tuesday.
  • Tighter supply, tougher rules rattle key U.S. funding market (Reuters) Last month’s spike in failed trades in Wall Street’s key funding market sparked fears that it could be a sign of trouble brewing in the U.S. financial system, but the disruptions appear more likely to mark the “new normal” of the post-crisis era. Wall Street institutions, hedge funds and real estate investment trusts rely on the $5 trillion repurchase agreement market to finance their daily trades and any disruption is worrying because it could force them to cut holdings of bonds, stocks and other securities.
  • Bernanke Friend Who Quit Riksbank Says Lower Bound Still Far Off (Bloomberg) The former Riksbank board member who accurately predicted Sweden’s descent into negative rates says a growing consensus that policy makers are bumping up against the limits of stimulus is simply wrong. Ex-deputy governor, Lars E. O. Svensson, who used to be a Princeton University colleague of former Federal Reserve Chairman Ben Bernanke, said Sweden can easily cut rates further below zero, expand quantitative easing or even set a floor for the country’s currency if it needs to.
  • Exclusive: IMF says Greek debt ‘highly unsustainable’, debt relief ‘essential’ – draft memorandum (Reuters) The International Monetary Fund wants Greece’s European partners to grant Athens substantial relief on its debt which it sees remaining “highly unsustainable”, according to a draft IMF memorandum seen by Reuters. Earlier on Tuesday, Greece and inspectors from its EU/IMF lenders adjourned talks on a crucial bailout review, mainly due to a rift among the lenders over a projected fiscal gap by 2018 and over Athens’ resistance to unpopular reforms.
  • OPEC trims 2016 oil demand growth, says its output rises slightly (Reuters) OPEC on Wednesday predicted global demand for its crude oil will be less than previously thought in 2016 as consumption slows down, increasing the excess supply on the market this year. The monthly report from the Organization of the Petroleum Exporting Countries lowered its forecast of world oil demand growth by 50,000 barrels per day (bpd) and said further downward revisions could follow.
  • With Abenomics Withering, Japan Hears Calls for Fresh Action (Bloomberg) This wasn’t how it was supposed to be. When Japanese Prime Minister Shinzo Abe and his lieutenants unleashed massive monetary and fiscal stimulus in 2013, the shock therapy was meant to jump start the economy and end a decades-long battle against deflation. More than three years on, the policy dubbed ‘Abenomics’ looks in its worst shape yet, and that’s now spurring some to call for yet stronger efforts to reanimate the world’s No. 3 economy.
  • Coal Slump Sends Mining Giant Peabody Energy Into Bankruptcy (Bloomberg) U.S. coal giant Peabody Energy Corp. filed for bankruptcy on Wednesday, the most powerful convulsion yet in an industry that’s enduring the worst slump in decades. The company filed Chapter 11 petitions for most of its U.S. entities in U.S. Bankruptcy Court in St. Louis Wednesday, listing $10.1 billion in debt. All of Peabody’s mines and offices are continuing to operate and are expected to continue doing so for the duration of the process, according to a statement.
  • Valeant Pharmaceuticals International shares slip further after default notice over delay in filing financial report (Financial Post) Valeant Pharmaceuticals International says it has received a notice of default from some debt holders as a result of the delay in filing the company’s 2015 audited financial report with U.S. regulators. The notice of default starts the clock ticking on a 60-day period in which the Quebec-based drug and health-care products company has to get the filing completed. That gives Valeant until June 11 to complete the filing of its 10-K report, which its says would “cure the default in all respects.”
  • JPMorgan Said to Trim 5% of Jobs at Asia-Pacific Wealth Unit (Bloomberg) JPMorgan Chase & Co. cut about 5 percent of jobs at its Asia-Pacific wealth-management unit as it refocuses staff on serving clients with higher investment thresholds, a person with knowledge of the matter said. The approximately 30 job cuts, which happened this week, involved mostly relationship managers based in Hong Kong and Singapore, said the person, who asked not to be identified discussing private information.


Overnight markets

  • Overview: US 10yr note futures are down 0% at 130-18, S&P 500 futures are up 0.46% at 2065.25, Crude oil futures are down -1.4% at $41.58, Gold futures are down -1.07% at $1247.4, DXY is up 0.59% at 94.512.

 US Economic Data

  • Retail Sales Advance MoM growth -0.3%, weaker than expected and down from prior month
  • Retail Sales Ex Auto MoM growth 0.2%, weaker than expected and down from prior month
  • Retail Sales Ex Auto and Gas MoM growth was 0.1%, weaker than expected and down from prior month
  • PPI Final Demand MoM variation was -0.1%, weaker than expected and down from prior month
  • PPI Ex Food and Energy MoM variation was -0.1%, weaker than expected and down form prior month
  • PPI Final Demand YoY variation was -0.1%, weaker than expected and down from prior month
  • PPI Ex Food and Energy YoY growth was 1.0%, weaker than expected and down form prior month
  • Federal Reserve will release Beige Book at 2:00 PM

Canadian Economic Data 

  • Bank of Canada Rate Decision will be released at 10:00 AM
  • BOC Releases Monetary Policy report at 10:00 AM


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