Market update
US tsys slightly lower, above avg volume in TY1 futures (395k), with prices flat in Asia, lower in European trading and back to unch in NA trading. S&P stock futures are ~0.40% higher, European equities higher for a second day, the Stoxx at the highest ll since April 28th. The USD index lower, crude up 1.1% above $49.00 – yesterday’s API report showed crude inventories fell 5.14 mln barrels last week, the biggest decline since Dec. Core Euro bonds higher despite higher stocks & better than exp German IFO sentiment, with duration extension trades going thru, short covering after E821mln German 30Y bond auction. Euro Peripheral bonds higher led by Greece after the Eurogroup agreed to release bailout funds to Greece The US auctions $34bln in 5Y notes at 1:00EST. Yesterday’s 2Y note auction stopped 2bps thru @0.92%, with direct (end user) participation the highest in 3yrs at 32.5% vs 13% avg. GOCs are unch before BOC decision at 10:00 with no change expected in the o/n rate, while the statement could take on a more dovish tone in view of March’s large (4.2%) decline in non-energy exports, even as the real trade balance was in surplus. Provi spreads opening firm after closing tighter yest on stocks & well received long Alberta deal (124.5, now 122.5 bid). Supply is still expected prior to next week’s cpn pmt. Altalink (A/A) is in the mkt with a 10Y fixed at ~140. Utility spreads have not been immune to the selling pressure which has impacted the BBB sector disproportionately over the last three weeks as supply has begun to be a factor after a quiet April, with Banks expected to be in the mkt shortly post earnings as well.
News headlines
- Stocks Rally With Oil as Don’t Fear the Fed Is New Market Mantra (Bloomberg) Global equities rose to a two-week high amid increasing investor optimism that the world economy can withstand higher U.S. interest rates. Oil advanced and gold fell amid a retreat in the dollar. The MSCI All Country World Index climbed for a second day, European equities jumped, and futures signaled a higher opening for U.S. shares. Emerging-market stocks rose the most in six weeks, while South Korea’s won led currencies higher even as China set the yuan’s reference rate at the weakest level since 2011.
- Oil nudges $50 a barrel as investors bet on shrinking overhang (Reuters) Oil rose towards $50 a barrel on Wednesday for the first time in seven months, driven by expectations that shrinking supply will help erode any overhang of unwanted crude, particularly after industry data showed a sharp fall in U.S. inventories. A series of outages around the world, such as wildfires in Canada and a spate of violence in Nigeria’s oil-producing region, has helped cut global oil supply by nearly 4 million barrels per day this month.
- China Wants to Set Prices for the World’s Commodities (Bloomberg) China has put the world’s traditional financial centers on notice that it wants to develop its raw material markets as hubs for setting prices, seeking to marry the country’s commercial heft with a much greater say in determining how much commodities cost. “We’re facing a chance of a lifetime to become a global pricing center for commodities,” Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said at the Shanghai Futures Exchange’s annual conference in the city on Wednesday.
- China Said to Plan Asking U.S. on Timing of Fed Rate Hike (Bloomberg) Chinese officials plan to ask their American counterparts in annual talks next month about the chance of a Federal Reserve interest-rate increase in June, according to people familiar with the matter. The Chinese delegation will try to deduce whether a June or a July rate rise is more likely, as their nation’s policy makers prepare for the potential impact on financial markets and the yuan, the people said, asking not to be named as the discussions were private.
- Euro zone hails ‘breakthrough’ with Greece, IMF debt deal (Reuters) The euro zone gave Greece its firmest offer yet of debt relief in what finance ministers called a breakthrough deal that won a provisional commitment from the IMF to return to taking part in the bailout for Athens, heartening investors. After talks that lasted into the small hours of Wednesday, Eurogroup finance ministers gave a nod to releasing 10.3 billion euros ($11.5 billion) in new funds for Greece in recognition of painful fiscal reforms pushed through by Prime Minister Alexis Tsipras’s leftist-led coalition, subject to some final technical tweaks.
- Bank of Montreal hikes dividend but profit dips and bad loan provisions rise (Financial Post) The Bank of Montreal’s second quarter profit fell to $973 million, down three per cent from a year ago, as it took bigger provisions for credit losses and restructuring expenses. The bank reported $999 million of net income during the same quarter last year. The earnings amounted to $1.45 per share, down from $1.49 per share a year ago.
- Oilsands companies prepare to restart production as fire moves East (Financial Post) The threat posed by the wildfire that shut down 1.2 million barrels of daily oilsands production has not completely passed, but oilsands companies have begun sending crews back up to northern Alberta to prepare to restart their facilities. Teams from Suncor Energy Inc., Syncrude Canada Ltd., Athabasca Oil Corp. and ConocoPhillips Canada are either en route to, or on the ground at, oilsands projects around Fort McMurray preparing to start pumping oil once again.
Overnight markets
- Overview: US 10yr note futures are down -0.1206% at 129-13, S&P 500 futures are up 0.35% at 2082.25, Crude oil futures are up 1.28% at $49.24, Gold futures are down -0.59% at $1224.9, DXY is down -0.04% at 95.534.
US Economic Data
- 9:00 AM: FHFA House Price Index, m/m, March, est. 0.50% (prior 0.40%)
- 9:45 AM: Markit US Services PMI, May, est. 53.0 (prior 52.8)
- Markit US Composite PMI, (prior 52.4)
Canadian Economic Data
- 10:00 AM: Bank of Canada Rate Decision, May, est. 0.50% (prior 0.50%)
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