26/04/2016

cti2015header-morning comments web

Market update

US tsys trading slightly higher after Durable Goods came in weaker than expth the US 10Y 1.90 (-0.5bps), as European stocks & commodities ex crude higher, core European bonds are lower & steeper weighed by supply. The US auctions $34bln in 5Y notes at 1:00Pm after a lackluster 2Y sale yest thou interest in the short end of the curve may be tempered somewhat ahead of the Fed, yet we feel the auction should go well given how 5s have underperformed on the UST curve over the past month. The mkt still seems to be under estimating the no. of rate hikes this yr with consensus looking for at least two and futures mkts priced for barely 15 bps by year end. GOCs slightly higher with tsys post 8:30 data, BOC Gov Poloz speaking on the effectiveness of monetary policy. The tone in provis remains firm on lack of supply, higher cda yields – spds closing 1bp tighter yest, thou Ontario rumoured to be coming today with a 10Y on good interest , thou 10Y Ontarios are the most expensive on a credit basis vs Ont 5s since Jan.

News headlines

  • European Stocks Rally After Earnings; Pound Jumps, Metals Slide (Bloomberg) European stocks climbed for the first time in four days as BP Plc and Standard Chartered Plc rose after the companies reported earnings. The pound strengthened against all of its major counterparts on speculation that the U.K. is less likely to leave the European Union. Banks led gains in Europe and Asian equities pared their decline. The yen rose and Treasuries ended a six-day decline before central bank meetings this week.
  • Oil’s Recovery Inches Higher as ‘Fracklog’ Awaits Price Trigger (Bloomberg) Oil’s rebound from the lowest level in more than 12 years may face an abrupt halt as prices near a level that could trigger a wave of new U.S. shale production. Futures in New York have advanced more than 60 percent since the February low and closed at $43.73 a barrel Friday, the highest in five months, nearing a $45-level IG Ltd. says makes some shale plays profitable. Drilled, uncompleted wells could return 500,000 barrels a day back to the market, according to Richard Westerdale, a director at the U.S. State Department’s Bureau of Energy Resources. The inventory of wells is known as the fracklog.
  • S. workforce growth may give Fed one more reason to go slow on rates (Reuters) Americans with a high school education or less are returning to the labor force in larger numbers, a trend that points to a broadening of economic growth, but could also keep wage growth subdued and stay the Federal Reserve’s hand in its hiking cycle. The Federal Reserve meets this week and is expected to leave rates on hold. One factor it watches is slack in the labor market to see how much room the economy has to grow without triggering inflation.
  • Yen gains versus dollar as BOJ, Fed meetings near (Reuters) The yen rose on Tuesday, moving away from lows of several weeks against the dollar and euro as prospects of further monetary stimulus this week from the Bank of Japan remained unclear. With policy decisions from the Federal Reserve and the BOJ due within hours of each other, many investors are likely to stay on the sidelines. The Fed, which is expected to leave interest rates unchanged, will announce its decision on Wednesday while the BOJ concludes its two-day meeting on Thursday.
  • South Korea’s Growth Slows as Investment, Consumption Wane (Bloomberg) South Korea’s economy slowed in the first quarter as sluggishness in exports weighed on corporate investment and consumers cut back on spending. Gross domestic product rose 0.4 percent from the previous quarter, the Bank of Korea said Tuesday, matching the increase that was forecast by analysts surveyed by Bloomberg. The economy expanded by 2.7 percent from a year earlier.
  • Why Valeant Pharmaceuticals International’s new CEO may signal a shift from ‘disruptor’ to ‘plain vanilla’ (Financial Post) Less than a year ago Valeant Pharmaceuticals International Inc.’s CEO Michael Pearson represented a disruption to big pharma by coming from outside the industry, using aggressive acquisitions and strategic business tactics to grow the company to a global giant.  Now the company has hired Joseph Papa as the new CEO, a 35-year pharmaceutical industry veteran with a history of taking a balanced approach to business.
  • Teck Resources Ltd reports surprise adjusted profit as costs decline (Financial Post) Teck Resources Ltd. reported much better-than-expected first quarter results as it responded to weak commodity prices with deep cost reductions. Adjusted profit came in at $18 million, or three cents a share, Vancouver-based Teck said on Tuesday. Analysts, on average, were expecting a loss of four cents.

 

Overnight markets

  • Overview: US 10yr note futures are down -0.1329% at 129-7, S&P 500 futures are up 0.24% at 2088.25, Crude oil futures are up 1.1% at $43.11, Gold futures are down -0.53% at $1233.6, DXY is down -0.19% at 94.663.

US Economic Data

  • 8:30 AM: Durable Goods Orders, March, 0.8%,  est. 1.9% (prior -3.0%)
    •      Durables Ex Transportation, March, -0.2% , est. 0.5% (prior -1.3%)
  • 9:45 AM: Markit US Services PMI, April, est. 52 (prior 51.3)
    •      Markit US Composite PMI, April,  (prior 51.3)
  •  10:00 AM: Conference Board Consumer Conference Index, April, est. 96 (prior 96.2)
    •      Richmond Fed Manufacturing Index, April, est. 12 (prior 22)

Canadian Economic Data 

  • There 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