cti2015header-morning comments web

Market update

US tsys slightly lower, rebounding curve flatter led by the 5Y with the US 10Y 1.791 (+2bps), higher than avg volume in TY1 futs. Core Euro bonds lower, German 10Y yield @0.177 at three week high. German investor confidence rose for a second month in April to 11.2 from 4.3 vs 8.0 exp. Global stocks higher with the Nikkei up 3.6% and Europe up 1.6%. Crude continuing to move higher post Doha meeting – oil strike in Kuwait has reduced output to 1.1mln bpd from 2.8mln, thou Russia said it is considering raising prod this yr.  Boston Fed pres Rosengren said the mkt was underpricing the pace of rate hikes this yr and that the Fed was closer to reaching its inflation goals. Argentina launched its two part $6.75bln 10Y & $2.75bln 30Y bond issue. In Canada, GOCs higher with tsys – yest the 10Y fly hit the cheapest level since early March – we expect some hedging in advance of a building corp pipeline – also Ont & NB possible today. Provis opening tighter with spds at new tights for the year – Ont 46 105/104 (-1bp) , Ont 26 92.5/92.

News headlines

  • Global Stocks Rally on Crude, Earnings as Emerging Markets Jump (Bloomberg) Global stocks climbed to a four-month high and emerging markets rallied as oil rose above $40 a barrel and corporate results beat analyst estimates. European equities were poised for their highest close since January as financial reports boosted companies including Danone and L’Oreal SA. South Korea’s won gained as the central bank refrained from loosening monetary policy and South Africa’s rand jumped, while the dollar and yen weakened. A labor strike in Kuwait boosted the price of crude, which had dropped in early trading on Monday after major producers failed to reach agreement on a proposed output freeze. Silver surged to its strongest level since June, credit markets strengthened and government bonds in Europe and the U.S. declined.
  • Oil rises as Kuwaiti oil workers strike cuts output for third day (Reuters) Oil rose around two percent on Tuesday as a strike by oil workers in Kuwait nearly halved crude production from the OPEC member, overshadowing bearish sentiment following Sunday’s failure by producers to agree to freeze output levels. Thousands of Kuwaiti oil workers downed tools for a third day on Tuesday to protest against planned public sector pay reform, cutting crude output to 1.5 million barrels per day (bpd), according to an oil spokesman cited by news agency KUNA.
  • Silver Heads for a Bull Market as Prices Rally to 10-Month High (Bloomberg) Silver is poised to enter a bull market after prices jumped to a 10-month high and as investors pile into precious metals, with top forecasters’ staying positive on gold. Silver advanced as much as 3.5 percent to the highest level since June and traded up 3 percent at $16.7065 an ounce by 7:36 a.m. in New York. A close at that level would mark the start of a bull market. Investors have been pouring cash into silver, known as the devil’s metal because of its often wild price swings. Assets in exchange-traded funds are approaching a record and last month total holdings increased 5.3 percent, the biggest jump since 2010, according to data compiled by Bloomberg.
  • German Investor Optimism Rises to 2016 High as China Risk Abates (Reuters) German investor confidence climbed for a second month, rising to the highest level this year, as concerns over China’s economy eased and the European Central Bank ramped up euro-area stimulus. The ZEW Center for European Economic Research said on Tuesday that its index of investor and analyst expectations, which aims to predict economic developments six months ahead, advanced to 11.2 in April from 4.3 in the previous month. Economists in a Bloomberg survey predicted an increase to 8.0.
  • Goldman Sachs First-Quarter Profit Drops 60% as Revenue Plunges (Bloomberg) Goldman Sachs Group Inc., the worst performer in the Dow Jones Industrial Average this year, reported a 60 percent drop in profit as first-quarter revenue fell to the lowest since Chief Executive Officer Lloyd Blankfein took the top post in 2006. Net income fell to $1.14 billion, or $2.68 a share, from $2.84 billion, or $5.94, a year earlier, the New York-based company said Tuesday in a statement. Goldman Sachs’s revenue fell 40 percent to $6.34 billion.
  • Bank of Korea Cuts Growth Forecast, Holds Rate at Record Low (Bloomberg) The Bank of Korea lowered its forecasts for economic growth and inflation, leaving the door open to cut borrowing costs further after holding its key interest rate unchanged at a record low on Tuesday. The decision to keep the seven-day repurchase rate at 1.5 percent was forecast by 17 of 20 economists in a Bloomberg survey. Governor Lee Ju Yeol said that while this rate is accommodative, there is still room to lower it. It hasn’t moved since June last year.
  • China Sovereign Fund to Seek Control of $8 Billion Yum Unit (Bloomberg) China wants to get control of the most popular fast-food chain in the country. A consortium backed by sovereign fund China Investment Corp. has expressed interest in buying a majority stake in Yum! Brands Inc.’s China business, which runs more than 7,100 KFC and Pizza Hut eateries across the nation, people with knowledge of the matter said. The investor group, which also includes KKR & Co. and Baring Private Equity Asia, is conducting due diligence on the unit, according to the people, who asked not to be identified as the information is private. A deal could value Yum! China at $7 billion to $8 billion, the people said.


Overnight markets. 

  • Overview: US 10yr note futures are down -0.1437% at 130-10, S&P 500 futures are up 0.44% at 2096, Crude oil futures are up 1.06% at $40.2, Gold futures are up 0.95% at $1246.7, DXY is down -0.24% at 94.267.

 US Economic Data 

  • Housing Starts came in at a level of 1089k, weaker than analyst’s estimate
  • Housing Starts MoM variation was  -8.8%,  missing the analysts estimate
  • Building Permits number came in at a level of 1086k, weaker than expected by the analysts
  • Building Permits MoM  variation MoM was -7.7%, missing the analysts estimate

 Canadian Economic Data

  •  There is no major economic data 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