Market update
US tsys lower, 10Y 1.722 (+2.3bps) on below avg volume, no reaction to weaker than exp May Empire Man. Crude at six month high above 47.00 (+3.8%) on supply fears and Goldman forecast. Fed Lacker said there is a good case for raising rates in June in an article in the Wash Post.. Core Euro bonds mixed, long term bunds lower with oil, gilts slightly higher in the long end. UST yields fell to one month lows last week, capped by a 5bp rally in 10s despite better retail sales & PPI data. Retail stocks had their worst week since April 8th with earnings from Nordstrom, Macys & Kohls all disappointing. Latest CFTC COT May 10th report showed large specs reducing shorts across the curve. GOCs lower with tsys , provi spreads starting the week 1bp wider, after widening ~4bps last week on risk off and $650mln in long supply from Ont & Newf.
News headlines
- Oil Climbs to Highest Since November as European Shares Retreat (Bloomberg) Brent crude rose to a six-month high, leading a rebound in commodities and boosting the ruble and mining companies, as supply disruptions in Nigeria added to production woes. Oil extended last week’s gains as Goldman Sachs Group Inc. increased its price forecast, saying the market had moved into a supply deficit earlier than expected. Precious metals rallied with aluminum and commodity producers climbed, while almost all of the other industry groups in the Stoxx Europe 600 Index fell. Irish bonds advanced, outperforming their euro-area peers, while the Polish zloty strengthened after favorable reports from Moody’s Investors Service. Asian stocks rose from a one-month low.
- Yen weakens on Japan intervention talk before G7 meets (Reuters) The yen fell on Monday as Japan, readying to host a Group of Seven meeting, again signaled its willingness to intervene in the market, driving the currency to erase early gains made on disappointing Chinese data. Vice finance minister for international affairs Masatsugu Asakawa told the Nikkei newspaper G7 and G20 countries had discussed how to deal with disorderly currency moves, indicating it was a shared understanding that market interventions were justified if exchange rate moves were excessive.
- Oil prices rise on Nigeria outages, Goldman forecast (Reuters) Oil prices jumped over 2 percent on Monday to their highest since November 2015 on growing Nigerian oil output disruptions and after long-time bear Goldman Sachs said the market had ended almost two years of oversupply and flipped to a deficit. Brent crude futures were trading at $48.83 per barrel at 1118 GMT, up $1 or 2.05 percent. U.S. crude futures were up 98 cents, or 2.08 percent, at $47.19 a barrel.
- Why China’s private sector needs a ‘high degree of attention’ (Reuters) Xia Xiaokang and Bruno Chen, who both run private-sector companies, are the sort of businessmen that Chinese leaders are increasingly concerned about as economic growth slows. Beijing is counting on the private sector to invest more in the economy and take up the slack as the government tries to engineer a shift away from largely state-run heavy industry to more entrepreneurial and services-led growth.
- Platinum Seen Over Worst as Bulls Wager on Automaker Demand (Bloomberg) There’s a growing feeling in the platinum and palladium market that the worst is over. After dropping to the lowest in at least half a decade in January, prices since rallied back into a bull market as the outlook for continued low U.S. interest rates reignited the appeal of precious metals. The two commodities will climb about 20 percent through the end of next year, partly on higher demand from carmakers, according to 12 traders and analysts surveyed by Bloomberg.
- Berkshire Took Apple Stake Worth About $1 Billion in 1st Quarter (Bloomberg) Warren Buffett’s Berkshire Hathaway Inc. disclosed a stake in Apple Inc., betting that the technology company will rebound after a slump driven by a slowdown in iPhone sales. Berkshire held 9.81 million Apple shares as of March 31, according to a regulatory filing Monday from the billionaire’s Omaha, Nebraska-based company. The holding was valued at $1.07 billion at the end of the first quarter.
- Wall Street’s Bond Forecasters Splinter as Fed Credibility Wanes (Bloomberg) To Thomas Costerg, the big question for bond investors isn’t whether the Federal Reserve will raise U.S. interest rates this year. It’s how long before the central bank is forced to cut them. As a senior economist at Standard Chartered Bank, Costerg says the risk of a recession will cause the Fed to backtrack on its move to end seven years of near-zero rates. That will underpin demand for Treasuries and push benchmark 10-year yields to 1.6 percent, one of the lowest forecasts in Bloomberg’s latest survey.
Overnight markets
- Overview: US 10yr note futures are down -0.1909% at 130-23, S&P 500 futures are up 0.01% at 2043.75, Crude oil futures are up 2.06% at $47.16, Gold futures are up 1.27% at $1288.8, DXY is down -0.17% at 94.445.
US Economic Data
- 8:30 AM: Empire Manufacturing, May, -9.02, est. 6.50 (prior 9.56)
- 10: 00 AM: NAHB Housing Market Index, May, est. 59 (prior 58)
Canadian Economic Data
- 9:00 AM: Existing Home Sales, m/m, April, (prior 1.5%)
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