Market Update
US tsys higher with the long end leading, US 10Y 2.444 (-2.7bps) after Nov retail sales came in short of expectations 0.1% vs 0.3% with Oct revised lower as well thou PPI rose 0.4% vs 0.1% exp. Core Euro bonds also higher, supported by the Bank of Japan’s buy operation in the long end of the JGB curve, said to counter some of the latest increase in yields. 10Y gilt yields 4bps lower @1.41% as UK employment fell for the first time this year in Oct, thou average weekly earnings were strong @ 2.5%. GOC yields lower, 2s10s ~3bps flatter with the 10Y 1.71%. Provis starting 0.5bps tighter after closing another 1.5bps tighter yest. Alberta priced $600mln longs at 103 (9vs ont) -opening 102.5/102. In IG, IPL was in the mkt with a 10Y @168 OTC /173 vs 26s, which looked 10-15bps cheap, it closed 166 bid in secondary trading. Fairfax priced $450mln 10Ys @ 295. We expect the GOC mkt to be fairly range bound until the FOMC decision at 2:00 and Yellen press conference at 2:30 . An updated Fed ‘dot’ plot will be released alongside the decision, along with a new series of econ projections (SEP).
News headlines
Stocks Fall, Bonds Rise as Caution Prevails Before Fed Meeting (Bloomberg) Caution pervaded markets before the Federal Reserve’s expected interest-rate hike later Wednesday, with European stocks slipping from an 11-month high and government bonds advancing. Crude retreated on industry data showing U.S. stockpiles increased. The Stoxx Europe 600 Index retreated before the conclusion of the Fed’s two-day meeting, as investors awaited clues on the likely path of rates in 2017.
OPEC points to larger 2017 oil surplus, unless cuts implemented (Reuters) OPEC pointed on Wednesday to a growing oil supply surplus next year unless members implement their deal to curb output from record levels and outside producers also deliver on cutback pledges made at the weekend.
Countdown to first Fed hike in a year under way, but focus shifting to 2017 (Reuters) World stocks and the U.S. dollar edged lower, while government bond yields fell, with investors certain the Federal Reserve will lift interest rates for the first time in a year on Wednesday but less so about what it may do in 2017. European shares fell 0.4 percent and U.S. stock futures were flat, suggesting a cautious start to Wall Street trading after Tuesday’s stock market rally to all-time highs.
U.K. Employment Declines for First Time in More Than a Year (Bloomberg) U.K. employment fell for the first time in more than a year in the three months through October as the labor market showed some signs of weakness. The number of people in work fell by 6,000 to 31.76 million people, the Office for National Statistics said on Wednesday. While the decline was small, and the jobless rate was unchanged at 4.8 percent, the statistics office said the labor market “appears to have flattened off in recent months.”
Oil prices fall on rising U.S. crude stocks, OPEC output concerns (Reuters) Oil prices fell on Wednesday following a reported rise in U.S. crude inventories and an estimate that OPEC may have produced more crude in November than previously thought, potentially undermining a planned output cut. International Brent crude futures were down 58 cents at $55.14 per barrel at 1054 GMT.
IEA warning to high-cost producers: ‘Think twice’ before sanctioning projects as high oil prices won’t last (Financial Post) A report published Tuesday disputed the renewed optimism being felt among high-cost producers such as Canada’s oilsands, saying OPEC’s deal to cut output is only a short-term boon for oil prices. In its monthly oil market report, the Paris-based International Energy Agency reiterated that the recent production cut between OPEC and non-OPEC members is a six-month agreement that could easily be revised in mid-2017
Overnight markets
Overview: US 10yr note futures are up 0.3026% at 124-10, S&P 500 futures are down -0.13% at 2264.75, Crude oil futures are down -1.49% at $52.19, Gold futures are up 0.47% at $1164.5, DXY is down -0.29% at 100.78, CAD/USD is down -0.21% at 0.7632.
US Economic Data
| 8:30 AM | Retail Sales Advance, m/m, Nov, 0.1%, est. 0.3% (prior 0.8%, revised 0.6%) |
| Retail Sales Ex Auto, m/m, Nov, 0.2%, est. 0.4% (prior 0.8%, revised 0.6%) | |
| PPI Final Demand, m/m, Nov, 0.4%, est. 0.1% (prior 0.0%) | |
| PPI Ex Food and Energy, m/m, Nov, 0.4%, est. 0.2% (prior -0.2%) | |
| PPI Ex Food, Energy, Trade, m/m, Nov, 0.2%, est. 0.2% (prior -0.1%) | |
| PPI Final Demand, y/y, Nov, 1.3%, est. 0.9% (prior 0.8%) | |
| PPI Ex Food and Energy, y/y, Nov, 1.6%, est. 1.3% (prior 1.2%) | |
| PPI Ex Food, Energy, Trade, y/y, Nov, 1.8%, est. 1.7% (prior 1.6%) | |
| 9:15 AM | Industrial Production, m/m, Nov, est. -0.3% (prior 0.0%) |
| Capacity Utilization, Nov, est. 75.1% (prior 75.3%) | |
| Manufacturing (SIC) Production, Nov, est. -0.2% (prior 0.2%) | |
| 10:00 AM | Business Inventories, Oct, est. -0.1% (prior 0.1%) |
| 2:00 PM | FOMC Rate Decision, Dec 14th, est. 0.50-0.75% (prior 0.25-0.50%) |
| Fed Summary of Economic Projections |
Canadian Economic Data
| 8:30 AM | Statscan Releases Q3 National Balance Sheet Data |
| 8:30 AM | Teranet/National Bank HPI, m/m, Nov, 0.2%, (prior 0.3%) |
| 8:30 AM | Teranet/National Bank HPI, y/y, Nov, 11.9%, (prior 11.8%) |
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