Market update
US tsys jumping after soft core retail sales & PPI , buy stops being triggered in Dec 10Y futs as well as German bunds on the weaker data. Tsys were already higher overnite on bull flattening rally in core European bonds led by gilts on weak stocks and rise in UK jobless. Positive sentiment in the tsy market was at the highest level since March last week according to the latest JPM Treasury Client survey. WSJ article (see above)notes there is an increasing no. of Fed officials feeling that a rate rise this year is not appropriate given the state of the US economy – todays PPI/retail sales certainly validates a cautious stance on rate hikes. In Canada, GOCs are higher, curve 1bp flatter led by 10s. 5Y auction atnoon – WI roll tighter today 13.7/13.6. Provis slightly wider (0.5bps) with lower Cda yields , rumours of 10Y Ontario & possibly Sasky today.
News headlines
- Wells Fargo Posts Stronger (WSJ) Results Wells Fargo & Co. said its third-quarter profit and revenue rose more than expected, though the nation’s fourth-largest bank by assets continued to deal with a low interest-rate environment.
- Global shares, dollar slip as China inflation cools (Reuters) World shares fell for a second day running and the dollar dropped to its lowest in almost a month on Wednesdayfollowing new signs of a slowdown in China’s economy.
- Eurozone industrial production for August was far weaker than anyone expected (BI) Eurozone industrial production figures for August were just released, and they’re much weaker than analysts were expecting. An increase in output of about 1.8% was expected, but the actual figure came in at less than half that level, up by just 0.9%.
- Atop Fed, Doubt on Rate Timing Arises (WSJ) New doubts about the outlook for interest rates are emerging within senior ranks of the Federal Reserve.
- Canada’s days as an energy super-power are over and the oil crash is only one culprit (FP) Regardless of who wins the October 19 federal election, it’s increasingly clear that Canada’s days as a would-be energy super-power are over. Some of that has to do with oil’s price crash, but that was just the final straw, albeit a painful one.
- This unusual options trade signals that Wall Street is bracing for a black swan (Marketwatch) Blame it on a looming interest rate hike, sluggish global growth or conflict in the Middle East, but investors are girding for the worst!
Overnight markets
- Overview: IG24 5Y 78.898/79.531 (-0.195), US 10yr note futures are up +0.36% at 129-10+, S&P 500 futures are down -0.05% at 1993.0, Crude oil futures are down -0.15% at 46.59, Gold futures are up +0.73% at $1173.9, DXY is down -0.54% at 94.244.
US Economic Data
- MBA mortgage applications came in this morning at -27.6% for the week ending October 9th, versus prior week 25.5% increase.
- Retail sales increased 0.1% MoM in September, below expectations (0.2%), after increasing 0.0% the previous month.
- Retail sales excluding automobiles decreased -0.3% in September, compared to consensus of a -0.1% loss, and a revised -0.1% decrease in August.
- PPI came in at -0.5% MoM (-1.1% YoY) in September versus August 0.0% MoM (-0.8% YoY).
- PPI core decreased -0.3% MoM (+0.8% YoY) in September compared to previous month 0.3% MoM (0.9% YoY).
- Business inventories are forecast to increase 0.1% MoM in August, equal to previous month increase.
- Fed will release beige book at 14:00.
Canadian Economic Data
- There is no major economic data 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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230