cti2015header-morning comments web

Market update

US tsys opening lower, US 10Y 2.29 (+2bps), stocks higher, core Euro bonds lower as well pre FOMC. Relative calm in mkts as consensus if for first Fed rate hike since 2006. Measures of stock & tsy mkt volatility, while off the lows, are still far from pre Sep FOMC levels. European data released o/n were mixed (French, German PMIs). German 2016 bond issuance came in at E212.5bln – this was already leaked by Reuters yest and was a factor cited in the huge slide in bunds yest morn. In Canada, GOCs are lower, provis unch after trading up yest aft.

News headlines

  • Fed Poised to Mark the End of an Era (WSJ) The Federal Reserve’s likely decision Wednesday to raise short-term borrowing costs will mark the end of an era of zero interest rates, a period of extraordinary policy experimentation that has yielded mixed results.
  • UK unemployment rate falls to 5.2%, lowest in nearly 10 years (BBC) The UK unemployment rate fell to the lowest for nearly 10 years at 5.2% in the three months to October. It was the lowest jobless rate since the three-month period to January 2006, according to the Office for National Statistics (ONS). The number of people out of work fell by 110,000 to 1.71 million between August and October. There were 31.3 million people in work, 505,000 more than for a year earlier. Joblessness had been expected to remain at 5.3%, where it was a month ago, according to a poll of economists by news agency Reuters.
  • Eurozone recovery bolstered by strongest PMI reading since crisis (FT) A flash reading for the influential purchasing managers’ index for the region, compiled by data company Markit, edged down this month, from 54.2 in November to 54. But the three most recent readings have been the strongest on average for four and-a-half years and were all well above the crucial 50 level that indicates an expansion in economic activity. A separate reading for the eurozone’s largest economy, Germany, edged down slightly from 55.2 to 54.9 but signalled rates of job creation remain strong. Activity in France, the region’s second-largest economy, slowed from 51 in November to 50.3, although a separate reading for manufacturing was the strongest for more than one and-a-half years.
  • Valeant projects 30 percent growth in 2016 profit, shares jump (Reuters) Drugmaker Valeant Pharmaceuticals International Inc on Wednesday forecast that earnings would grow 30 percent in 2016, just below Wall Street’s highest expectations. Valeant shares rose 4.5 percent to $114.50 in premarket trading in New York, but remain far from an August high of $263.70.
  • China central bank sees economic growth slowing to 6.8 percent in 2016 (Reuters) China’s annual economic growth is likely to slow to 6.8 percent next year from an expected 6.9 percent this year, the People’s Bank of China said in a working paper published on Wednesday. The world’s second-largest economy still faces downward pressure and the impact of fiscal and monetary policies that were rolled out this year will be evident by the first half of 2016, the central bank said in the research report.


Overnight markets

  • Overview: IG25 5Y 89.436/90.011 (-0.822), US 10yr note futures are down -0.15% at 125-29+, S&P 500 futures are up +0.50% at 2047.25, Crude oil futures are down -0.46% at 37.18$, Gold futures are up +0.97% at $1070.8, DXY is down -0.03% at 98.189.

US Economic Data

  • MBA mortgage applications came in this morning at -1.1% for the week ending December 11th, versus prior week 1.2% increase.
  • Housing starts came in at 1173K (10.5% MoM) in November versus October 1062K (-12.0% MoM).
  • Building permits increase to 1289K (11.0% MoM) in November compared to previous month 1161K (5.1% MoM).
  • Industrial production is expected at -0.2% MoM in November compared to September -0.2%.
  • Capacity utilization is forecast at 77.4% in November, 0.1% lower than previous month.
  • Manufacturing production is expected at 0.0% MoM in November compared to 0.4% in October.
  • Markit US Manufacturing PMI (Preliminary) is forecast at 52.6 in December, 0.2 point lower than prior month.
  • FOMC Rate Decision is schedule at 14:00.

Canadian Economic Data

  • Int’l securities transactions for November came in at 22.08B, higher than previous month (3.35B).


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