cti2015header-morning comments web

Market update

US tsys lower, yields 2-4 bps higher, curve flatter with longs outperforming, US 10Y 1.477 (+3.7bps) vs 1.458 at the close yest. Euro stocks 2.7% higher, EU peripheral spds tighter led by Spain. Tsys fell in Asian on Asia real money selling, weakness in core European bonds. GOCs lower, yields 1-2bps higher, GOC 10Y below 1.10%. Provis opening better, Ont 46s trading up at 105,  supply more likely should equities manage to maintain a positive footing.

News headlines

  • US. Stock Futures Rise as Stimulus Hopes Outweigh Brexit Fears (Bloomberg) U.S. equity futures climbed, signaling the S&P 500 Index may advance for the first time since the Brexit vote, as optimism grew that policy makers will move to support financial markets. ontracts on the S&P 500 expiring in September jumped 0.8 percent to 2,001.50 at 12:32 a.m. in New York, after the underlying index tumbled 1.8 percent on Monday. More than $974 billion has been erased from S&P 500 stock values in the past two days, the third-most in history, according to data compiled by S&P Dow Jones Indices.
  • Battered sterling gets a reprieve, yen’s rally pauses (Reuters) Higher-yielding, riskier currencies such as the Australian dollar rose along with sterling on Tuesday as investors took a breather from a brutal selloff sparked by Britain’s vote to leave the European Union. Safe-haven currencies such as the yen JPY= and the Swiss franc EURCHF=, which had gained sharply since last Thursday’s vote, were weaker, although risk sentiment was fragile.
  • Brexit Steamrolls Fed Model for Stock Bulls as Bond Yields Drop (Bloomberg) The dangers of relying on valuation as a tool for market timing are on display right now in U.S. equities. At issue is something known as the Fed Model, a comparison of stock and bond yields that has been pointing bulls to equities for three months. As bond yields fell from their March highs, an investor guided by the theory would have bought shares, betting they’d rally as money flowed into them from fixed-income.
  • Japan should not give up right to intervene if yen rises sharply (Reuters) Japan should not give up the right to intervene in currency markets if the yen sharply rises as it will threaten the nation’s economy, a key economic adviser to Prime Minister Shinzo Abe said on Tuesday, after Britain’s vote to exit the European Union caused market turmoil.
  • Soros Wagered Deutsche Bank Would Drop in Brexit Turmoil (Bloomberg) Soros Fund Management took a short position in Deutsche Bank AG of about 7 million shares as turmoil from the U.K.’s decision to leave the European Union sent bank stocks lower. The position taken on Friday was equivalent to 0.51 percent of Deutsche Bank’s share capital, according to a German filing published on Monday. The document doesn’t show at which price the fund took the position. The position taken on Friday was equivalent to 0.51 percent of Deutsche Bank’s share capital, according to a German filing published on Monday. The document doesn’t show at which price the fund took the position.
  • China economy to grow 6.6 percent, needs policy support: government think tank (Reuters) China’s economy will grow at about 6.6 percent this year, and will need to be underpinned by policy support in the second half to counter downward pressures, according to the China Academy of Social Sciences (CASS). The forecast from one of China’s top government think-tanks was reported by the official Shanghai Securities Journal newspaper on Tuesday, and marked a slightly more downbeat outlook that one given in May, when CASS had forecast growth of 6.6 percent to 6.8 percent for the year.
  • S.-UK alliance seen outweighing Brexit trade concerns (Reuters) The United States looks unlikely to follow through on a threat to relegate Britain to second-class trade status once its ally leaves the European Union, as it weighs the potential costs of undermining the countries’ close diplomatic and military ties. President Barack Obama had warned ahead of Thursday’s “Brexit” referendum that Britain would move to the back of the queue on U.S. trade priorities if it voted to leave the bloc, well behind a much-larger U.S.-European trade deal now under negotiation.


 Overnight markets                                                                                    

  • Overview: US 10yr note futures are down -0.0938% at 133-5, S&P 500 futures are up 1.26% at 2010, Crude oil futures are up 3.02% at $47.73, Gold futures are down -0.63% at $1316.4, DXY is down -0.63% at 95.934.

US Economic Data

  • 8:30 AM: GDP Annualized, q/q,  1Q, 1.1%, est. 1.0% (prior 0.8%)
    • Personal Consumption, 1Q,  1.5%, est. 2.0% (prior 1.9%)
    • GPD Price Index, 1Q, 0.4%, est. 0.6% (prior 0.6%)
    • Core PCE, q/q, 1Q, 2.0%, est. 2.1% (prior 2.1%)
  • 10 :00 AM : Consumer Confidence Index, June, est. 93.5 (prior 92.6)
    • Richmond Fed Manufacturing Index, June, est. 3 (prior -1)

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