cti2015header-morning comments web

Market Update

US tsys losses accelerating after Oct durable goods rise much higher than exp (4.8% vs 1.7%), US 10Y 2.35% (+4bps), curve 2bps steeper led by 10Y. Tsys were already lower in Europe on new ECB lending measures and UK Autumn budget statement. UK 10y gilt yields 9bps higher 1.45% as the UK will increase gilt sales by Stg15bln in FY15/16 – much more than expected 94bln). GBP plunging on UK GDP revisions, stronger US data – USD index rising to highest level since March 2003.  GOCs lower, curve 3bps steeper with the Cda 10Y approaching 1.60% intraday high from last Wednesday. Provis unch, Ont 48s 92.5/92 (issued at 92.5 yest) despite higher all in yields, Nova Scotia 10Y as well as Ont 10Y rumoured for today. Long Cda auction at noon – $1.75bln in reopened Dec 48s. CI Financial’s 5Y @177 over Cdas very well received , closed 4-5 tighter.

News headlines 

S&P 500 Futures Signal Rally Ebbing; Bonds Decline in Europe (Bloomberg) Stock-index futures signal U.S. equities will stabilize after climbing to record highs against a backdrop of commodities ending the longest rally in a month and oil holding near $48 a barrel. S&P 500 futures were little changed after the gauge reached all-time highs for two straight days, while shares in Europe retreated from a one-month high. German bonds declined after Reuters reported that the European Central Bank is looking at ways to lend out more bonds and avert a market freeze. Italian debt sank with bank shares. Oil fluctuated after OPEC left participation by Iraq and Iran in the group’s plan to cut output unresolved.

U.K. Cuts 2017 Economic Forecast to 1.4% From 2.2% (Bloomberg) The U.K. has downgraded its 2017 economic forecast, estimating the economy will grow 1.4%, down from 2.2% in March this year. The revision, announced by Chancellor of the Exchequer Philip Hammond, comes after the British vote to exit the European Union in June, Bloomberg News reports

Oil prices capped by doubts OPEC-led cut will end glut (Reuters) Oil prices edged higher on Wednesday but gains were capped by investors’ doubts that oil cartel OPEC would agree to a large enough production cut to significantly reduce the global surplus when it meets next week. A strong dollar, trading near the 13 1/2-year peak hit last week, also weighed on prices amid thin trading ahead of the U.S. Thanksgiving holiday on Thursday. International Brent crude oil futures LCOc1 rose 11 cents to $49.23 a barrel at 0940 GMT (4:40 a.m. ET) after climbing to $49.42 a barrel earlier in Wednesday’s session on optimism OPEC would agree to an output cut.

German Bunds Drop as ECB Said to Consider Lending Out More Bonds (Bloomberg) German bonds reversed their gain, dropping with peers across the euro area, as the European Central Bank was said to be considering lending out the securities to avert a market freeze. The nation’s two-year notes were set for their first decline in eight days, pushing the yields up from a record low reached earlier Wednesday. The ECB is looking for ways to make it easier for banks to borrow bonds it has bought, so that they can be used as collateral for repo loans, Reuters reported, citing unidentified people familiar with the central bank.

Euro-Area Economic Growth Gathers Pace as Orders and Prices Rise (Bloomberg) Euro-area economic growth accelerated to its fastest pace this year as growing order books prompted companies to add more workers and raise prices. A Purchasing Managers’ Index for manufacturing and services rose to 54.1 in November from 53.3 a month earlier, IHS Markit said on Wednesday. That’s the strongest level in 11 months and above the 50 mark that divides expansion from contraction.

As Vancouver’s housing market cools, commercial property sales soar (TheGlobeAndMail) Claire Wyrostok, owner of popular Vancouver vegetarian restaurant Black Lodge, wonders how long it will be until Vancouver’s hot real estate market pushes her out of business. In the four years that Ms. Wyrostok has been at her current location, on Kingsway just off Fraser Street, many of the buildings in her strip have been sold and property values have more than doubled. Since Ms. Wyrostok’s three-year lease came up for renewal in March, she says the landlord is allowing her to rent only month to month.

Overnight markets                                                                     

Overview: US 10yr note futures are down -0.2735% at 125-12, S&P 500 futures are down -0.17% at 2196.5, Crude oil futures are down -0.81% at $47.64, Gold futures are down -1.39% at $1194.4, DXY is up 0.51% at 101.56, CAD/USD is up 0.36% at 0.7413.

US Economic Data 

8:30 AM Durable Goods Orders, Oct P, 4.8%, est. 1.7% (prior -0.3%, revised 0.4%)
Durables Ex Transportation, Oct P, 1.0%, est. 0.2% (prior 0.1%, revised 0.2%)
Cap Goods Orders Nondef Ex Air, Oct P, 0.4%, est. 0.3% (prior -1.3%, revised -1.4%)
Cap Goods Ship Nondef Ex Air, Oct P, 0.2%, est. 0.1% (prior 0.4%)
Initial Jobless Claims, Nov 19th, 251k, est. 250k (prior 235k, revised 233k)
Continuing Claims, Nov 12th, 2043k, est. 2008k (prior 1977k, revised 1983k)
9:00 AM FHFA House Price Index, m/m, Sep, est. 0.6% (prior 0.7%)
9:45 AM Markit US Manufacturing PMI, Nov P, est. 53.5 (prior 53.4)
10:00 AM New Home Sales, Oct, est.  590k (prior 593k)
New Home Sales, Oct, est. -0.5% (prior 3.1%)
University of Michigan Sentiment, Nov F, est. 91.6 (prior 91.6)
2:00 PM FOMC Minutes release from November 1-2 meeting

Canadian Economic Data

There is no major economic data release 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