Market update

US tsys opening sharply lower despite China equites being down sharply again (7.6%), US 10Y 2.07 (+6.5bps), curve ~1.5bps steeper. Tsys were under pressure since mid-morning, falling to lows once China rate cut was announced at 6:15EST. Euro stocks up 4.6%, USD index higher for 1st time in five days. Core Euro bonds lower led by ~10bp selloff in 10Y bunds on catch-up to yest & stronger IFO (see above). In Canada, GOCs much lower led by 10s – 3bps wider on the curve, longs off $1.30. Provis in ~1.5bps from yest close, Ont 46 traded 100.5., QC/Ont 45 6.5/6.0 from 7 yest.

News headlines

  • China’s Central Bank Cuts Interest Rates (WSJ) China took fresh moves to free up money for its slowing economy, after global investors expressed concerns over Beijing’s management of the world’s No. 2 economy.
  • Market turmoil clouds Fed rate outlook (FT) For the Federal Reserve, the China-induced equity slump could hardly have come at a more sensitive time. The US central bank has been meticulously priming financial markets for an interest rate rise all year, with next month’s meeting widely seen as its best opportunity to pull the trigger.
  • German business morale brightens as Greece jitters ease (Reuters) Business confidence in Germany unexpectedly improved in July after two monthly drops as an agreement between Greece and its creditors for talks on a third bailout lifted the mood at firms in Europe’s largest economy.
  • Oil Traders Race for Cover as Light at End of Tunnel Grows Dim (Bloomberg) What a difference a few days make. Investors are willing to pay the most since mid-July to protect from a drop in U.S. crude prices by the end of the year, according to a measure of options values. That’s a reversal from Aug. 20, when the premium for puts over calls was the smallest in nine months.

Overnight markets

  • Overview: IG24 5Y 83.5/84.2 (-4.15), US 10yr note futures are down -0.50% at 128-18, S&P 500 futures are up +3.43% at 1935.5, Crude oil futures are up +3.71% at 39.66, Gold futures are down -0.23% at $1150.90, DXY is up +0.85% at 94.121.
  • US BANK CDS (5yr): BAC 79/84 (-6), GS 99/104 (-5), MS 92/97 (-3), C 91/96 (-4), JPM 80/85 (-6), WFC 61/66 (-4)

 US Economic Data

  • FHFA House price index is forecasted to increase 0.4%  in June versus previous month 0.4%.
  • Case-Shiller house price index (20-City) is forecasted at 5.10% in June following a gain of 4.94% in May.
  • Markit US Manufacturing PMI (Preliminary) is forecast at 55.1 for August, 0.6 point lower than previous month.
  • New home sales are forecast at 510K (5.8% MoM) in July versus June 482K (-6.8% MoM).
  • Consumer confidence Index is expected at 93.4 in August compared to 90.9 for the previous month.
  • Richmond Fed Manufacturing activity index is expected at 10 in August lower than July (13).

Canadian Economic Data

  • There is no major economic data 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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230