13/07/2016

cti2015header-morning comments web

Market update

US Tsys back to bull flattening, futures outperforming on high volume with 319K Sep 10Y contracts traded so far. EGBs higher, bund curve flatter, USD lower vs majors, JPY last 104.64. Global stocks up, highlighted by a 0.84% gain in the Nikkei, 0.64% gain in IBEX while the Dax and Eurostoxx are up 0.14% and 0.20%, respectively. Commodities are mixed, energies down with WTI and Brent off 1.11% and 1.42%, respectively, after rising sharply following yesterday’s API data that showed a 2.2M build. Fed Kashkari was on the tapes in Tokyo, noting the Fed can be patient on raising rates, Fed Mester followed with comments that gradual rate increases are appropriate.Treasuries open NY firmer, 10-year note 1.469%. US stock index futures fractionally higher. Tsy will sell the 1pm ET $12B 30Y reopen Wed; traders may approach it cautiously as weak 10Y reopen Tues broke a string of very strong 10Y auctions.

News headlines

  • Stocks Climb With Copper as Brexit-Induced Volatility Subsides (Bloomberg) Wherever you look in global financial markets, signs are emerging that the fallout from Britain’s vote to leave the European Union is under control.  Global stocks are rising for a fifth day, having recovered almost $4 trillion in value lost in the days following the U.K.’s June 23 referendum, and emerging-market shares are at an eight-month high. Copper is rising, boosted by signs policy makers are prepared to act to limit the fallout, while acquisitions have resumed and corporate bond sales are showing signs of picking up. Havens such as the yen and government bonds have given back much of the gains they made since the Brexit vote.
  • Brexit, what Brexit? Shares near 2016 highs (Reuters) Stock markets traded within sight of their highest levels this year on Wednesday as the prospect of stimulative economic policy across the developed world eased immediate concern over Britain’s vote to leave the European Union. The swift moves by the Conservative Party that see Theresa May replacing David Cameron as prime minister on Wednesday have helped fund a recovery that, aside from sterling itself, has wiped out the negative reaction to the June 23 vote.
  • Japan Cuts Forecasts as Abe Advisers Urge Coordinated Stimulus (Bloomberg) Japan cut its forecasts for growth and inflation as two key advisers to Prime Minister Shinzo Abe urged coordinated stimulus from the government and the central bank to support the ailing economy. Current thinking in the government is for a fiscal package of about 10 trillion yen ($96 billion), according to people familiar with the discussions. Koichi Hamada and Etsuro Honda, who helped the prime minister shape his Abenomics policies, said in separate interviews on Wednesday that any fiscal injection should be done in concert with a boost in monetary policy from the Bank of Japan, which meets later this month.
  • Fed’s Mester heartened by U.S. job rebound in June (Reuters) The sharp rebound in U.S. job growth last month eased concerns that the country’s labor market had regressed, a top Federal Reserve official said on Wednesday, repeating she continues to expect gradual interest rate rises.  Cleveland Fed President Loretta Mester, speaking in Sydney, largely repeated a July 1 speech in London in which she said it was too early to judge the full effect of Britain’s vote to leave the European Union on the U.S. economy.
  • OPEC sees tighter 2017 oil market, Brexit drag on economy (Reuters) OPEC on Tuesday gave an upbeat outlook for the oil market in 2017, saying global demand for its crude would be higher than its current production and pointing to a supply deficit rather than a sizeable surplus that has weighed on prices. However, the Organization of the Petroleum Exporting Countries in a monthly report also cut its forecast for world economic growth this year, citing increased uncertainty following Britain’s vote to leave the European Union and said the pace of oil demand growth would slow slightly next year, in its first 2017 forecast.
  • Spanish Banks Surge as Fears Subside Over EU Mortgage Ruling (Bloomberg)  Spanish banks such as Banco Popular Espanol SA surged after an aide to the European Union’s top court said they may avoid having to refund billions of euros to customers who paid too much interest on home loans before a 2013 ruling on so-called mortgage floors. Spain is entitled to apply the time limit due to the “macroeconomic issues associated with the scale” of the unfair mortgage terms, Advocate General Paolo Mengozzi of the EU Court of Justice said in a non-binding opinion Wednesday. The Luxembourg-based EU tribunal follows such advice in a majority of cases.
  • Carney Opens Lehman Playbook at Bank of England (Bloomberg) Mark Carney looks poised to repeat a strategy that served him well during the global financial crisis. As the Bank of England governor seeks to stave off any turmoil after Britain’s decision to quit the European Union, he has cited his experience at Canada’s central bank in 2008 as a guide. Acting early to prevent a deeper downturn became the hallmark of his approach in the prelude to the international slump, a perspective he can bring to the Monetary Policy Committee’s debate this week on whether to cut interest rates.

                                                                                                                                   

Overnight markets                                                                                          

  • Overview: US 10yr note futures are up 0.1887% at 132-25, S&P 500 futures are up 0.19% at 2149.75, Crude oil futures are down -0.9% at $46.38, Gold futures are up 0.61% at $1343.5, DXY is down -0.06% at 96.38.

US Economic Data

  • 8:30 AM: Import Price Index, m/m, June,  0.2%, est. 0.5% (prior 1.4%)
    •      Import Price Index, y/y,  June, -4.8%, est. -4.6% (prior -5%)
  • 14:00AM : U.S. Federal Reserve Release Beige Book

 Canadian Economic Data

  • 8:30 AM:  Teranet/National Bank HPI, m/m, June, 2.3%, prior 1.8%
    •       Teranet/National Bank HPI, June, 189.55 (prior 185.24)
  • 10:00 AM: Bank of Canada Rate Decisions, est. 0.50% (prior 0.50%)

 

 

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