Market update
US tsy yields 2-5bps higher, curve 2bps steeper as European bonds decline, stocks rise on latest Brexit polls which show ‘remain’ firmly in the lead. Euro stocks up 2.0% led by banks with the Euro Stoxx bank index up 3.0%, its fourth straight up day. Tsys pressured in Europe on heavier volume in TY futures (335k) as teo polls showed ‘remain’ camp leading as voting gets underway. Core Euro bonds lower led by 10Y gilts which are 6.5bps higher at 1.37% – yields have now retraced 50% of the April -June rally. GOCs sharply lower led by 5bp underperformance in 10s which are above 1.30% for the first time since June 1st. Provi spds in another 1bp, 7bps over the past week. In corps, we’ve seen client buying of NVCC and 5Y reits/telecom.
News headlines
- Stocks Rise With U.S. Futures as Pound Gains While U.K. Votes (Bloomberg) Stocks gained with U.S. equity-index futures and the pound strengthened to its highest level this year as the U.K.’s referendum on membership of the European Union got under way. European shares rose to a three-week high in above-average trading amid a vote that past opinion polls indicated was too close to call. A gauge of sterling advanced for a second day, while a measure of implied overnight price swings versus the dollar climbed to a record. Mexico’s peso and Russia’s ruble led gains among oil-exporting nations as crude advanced. The yen fell with gold as demand for haven assets eased, while perceived corporate credit risk fell for a fifth day.
- Sterling hits 2016 high, stocks climb as UK votes on Brexit (Reuters) Sterling hit a 2016 high and world stocks climbed for a fifth day running on Thursday, as British voters headed to the polls for a crucial vote on their European Union membership. Financial markets have been wracked for months by worries about what a potential Brexit would mean for Europe’s stability but the latest opinion polls showing the « Remain » camp holding a small lead have provided some comfort.
- Oil rises as investors focus on Britain’s EU referendum (Reuters) Oil prices rose by up to 2 percent on Thursday, shrugging off a smaller than expected draw on U.S. crude stocks as money and equity markets firmed after the last sweep of Brexit opinion polls raised optimism over Britain remaining in the EU. Global markets, including commodities, have been on tenterhooks for weeks ahead of Britain’s referendum on European Union membership on Thursday. The majority of results are expected to come in between 0100 and 0300 GMT following a YouGov poll shortly after voting closes at 2100 GMT.
- Euro zone business growth slows in June as services struggle (Reuters) Euro zone business growth decelerated more than expected this month, suggesting the current quarter’s economic performance won’t match the strong pace set at the start of the year, a survey showed. A surprising bounce in manufacturing activity was not enough to offset a marked slowdown in service industry growth, according to Markit’s flash Purchasing Managers’ Indexes. One of the first growth indicators in a month, the composite PMI fell to a 17-month low of 52.8 from May’s 53.1. A Reuters poll had predicted a more modest dip to 53.0.
- China industrial investment slowing amid tepid demand: deputy minister (Reuters) Growth in investment in China’s industry is slowing amid tepid external demand, the deputy industry minister said on Thursday. It will require hard work to meet China’s industrial growth targets for 2016, Feng Fei said, according to a statement on the Ministry of Industry and Information Technology’s website. China will accelerate reductions in capacity in some sectors in the second half this year, using market-based measures, he added.
- Air Canada Inc threatens to walk away from Bombardier Inc CSeries deal if legislation over maintenance isn’t passed (Financial Post) Air Canada is threatening to walk away from its plan to buy up to 75 CSeries jets from Bombardier Inc. unless the federal government gives it more flexibility over where it does its maintenance work. In testimony that appears to contradict the airline’s claims that politics had nothing to do with its decision to order the CSeries, an executive told a Senate committee reviewing changes to the legislation that governs Air Canada that it won’t buy the aircraft unless the government gives it more latitude.
- BlackBerry Misses Sales Estimates as Phone Unit Shrinks Further (Bloomberg) BlackBerry Ltd. reported earnings that exceeded analysts’ earnings estimates but came up short on revenue, dragged down by ever-shrinking smartphone sales that offset efforts to boost the company’s bottom line through software products.
Overnight markets
- Overview: US 10yr note futures are down -0.3569% at 130-28, S&P 500 futures are up 0.91% at 2095.75, Crude oil futures are up 1.53% at $49.88, Gold futures are down -0.54% at $1263.2, DXY is down -0.58% at 93.172.
US Economic Data
- 8:30 AM: Chicago Fed Nat Activity Index, May, -0.51, est. 0.11 (prior 0.10, revised 0.05)
Initial Jobless Claims, June 18, 259k, est. 270k (prior 277k)
Continuing Claims, June 11, 2142k, est. 2150k (prior 2157k, revised 2162k) - 9:45 AM : Markit US Manufacturing PMI, Jun P, est. 50.9 (prior 50.7)
- 10:00 AM: New Home Sales, May, , est. 560k (prior 519k)
New Homes Sales, m/m, May, , est. -9.5% (prior 16.6%)
Leading Index, May, est. 0.1% (prior 0.6%) - 11:00AM: Kansas City Fed Manufacturing Activity, June, est. -5 (prior -5)
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