cti2015header-morning comments web

Market Update

US tsys trading higher, US 10Y 2.451% (-2bps), curve flatter supported by move in European bonds.  European investors spending cash which had piled up in the selloff as EGB supply drops off into year end.  Gold trading lower, European stocks ~1.0% higher fairly broad based rally.  UK gilts 4-5bps lower despite higher than exp rise in UK inflation to 2 yr high– CPI 1.2% vs 0.9% exp in Nov, yet prices bolstered by reinvestment flows. US eco calendar light with only import prices, the US auctions $12bln in 30Y bonds at 1:00pm with the WI 30Y 3.117% vs 2.90% at previous auction Nov 10th. The latest JPM survey showed shorts among active clients the highest since Sept 2014. This comes after latest CFTC COT report which had large specs at record short Eurodollar futures. GOCs higher, 10Y 1.70% (-3bps), provis well bid to start after closing 1-1.5bps tighter yest led by longs. This morning Ont 48s trading down @ 94, 26s @ 81. CMB 5Y expected to price this morning, Dec 21s @ 44 – now 44/43.5 on 1.25/21, the new issue will have cpn closer to 1.525, we are sold out.

News headlines 

Stocks Rally as Italian Banks Lift Europe, Yen Falls Before Fed (Bloomberg) Global stocks advanced, and the yen fell, amid optimism the Federal Reserve’s meeting this week won’t unsettle markets as the central bank boosts interest rates to reflect a strengthening economy. Italian equities and bonds surged on bank recapitalization plans. Futures on the S&P 500 Index signal a rally that pushed it to a record last week has more to run.

Oil prices rise as Middle East producers confirm supply cuts (Reuters) Oil prices rose on Tuesday, supported by strong demand in Asia and supply cuts by Abu Dhabi, Kuwait and Qatar as part of production curbs organized by OPEC and other exporters. But traders said the market was pressured by investors closing financial positions that profited from strong gains the day before.

China property sales growth slides to lowest since November 2015 (Reuters) Home sales in China slowed sharply in November in the wake of government cooling measures, and new property investment slowed significantly from recent record levels – suggesting a key economic driver could be losing steam. Property sales growth slid in November to 7.9 percent from a year ago, its lowest since November 2015, and well short of October’s 26.4 percent increase.

UniCredit Plans $13.8 Billion Stock Sale, Cuts to Boost Profit (Bloomberg) UniCredit SpA plans to raise 13 billion euros ($13.8 billion) in a rights offer, betting that a balance-sheet cleanup and cost cuts will persuade investors that Italy’s biggest bank can restore profitability even without much revenue growth.

German Investor Confidence Unchanged as Economy Gathers Pace (Bloomberg) German investor confidence remained unchanged in a sign that Europe’s largest economy is on track to end the year on a strong note. The ZEW Center for European Economic Research in Mannheim said on Tuesday that its index of investor and analyst expectations, which aims to predict economic developments six months ahead, held at 13.8. Economists in a Bloomberg survey predicted an increase to 14.0. A gauge for current conditions rose to the highest level in more than a year.

UK inflation hits highest level in more than two years (TheGuardian) UK inflation climbed to 1.2% in November, the highest level in more than two years, in a sign that the fall in the value of the pound since the Brexit vote is fuelling a rise in the cost of living. The rise in the consumer prices index, from 0.9% in October, was largely driven by higher petrol and clothing prices according to the Office for National Statistics. November’s rate was the highest since October 2014, and slightly above the 1.1% forecast by City economists.

Morneau pulls Bank Act changes from budget bill after objections from Quebec, Senate (GlobeAndMail) Finance Minister Bill Morneau has agreed to remove controversial changes to the Bank Act from his latest budget bill in response to strong objections from Quebec and some Senators. The Quebec government opposes a section of Bill C-29 that asserts the federal government’s exclusive jurisdiction over Canada’s banking sector. Quebec insists that provinces have constitutional authority in areas such as consumer protection for bank customers and warns the bill would impose weaker standards than those currently in place provincially.

Overnight markets                                                                     

Overview: US 10yr note futures are up 0.2142% at 124-9, S&P 500 futures are up 0.36% at 2258.5, Crude oil futures are up 0.47% at $53.08, Gold futures are down -0.09% at $1164.7, DXY is down -0.11% at 100.92, CAD/USD is down -0.2% at 0.763.

US Economic Data 

6:00 AM NFIB Small Business Optimism, Nov, 96.7, est. 98.4 (prior 94.9)
8:30 AM Import Price Index, m/m, Nov, -0.3%, est. -0.4% (prior 0.5%, revised 0.4%)
8:30 AM Import Price Index, y/y, Nov, -0.1%, est. 0.0% (prior -0.2%, revised -0.3%)

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