Market update
US tsys opening weaker, curve 2bps steeper, US 10Y 1.864 (+4bps) after core PCE came in as exp for March, EI @ 0.6% also as exp. Tsys lower overnite despite weaker stocks as commodities rose – gold up for a fifth day on huge stop loss buying fueled in part by strength in the Yen which rose another 1.0% o/n. Japanese mkts closed Friday, UK out Monday so with month end today it is thought Japanese investors rebalanced portfolios, added to duration earlier this week providing less support for tsys today according to MNI. In Canada, GOCs lower led by 10s ~2bps on the curve in directional move – Feb real GDP -0.1% vs -0.2% exp. Provi spds 0.5bps tighter so far after closing 2bps wider yest.
News headlines
- Dollar Sinks to 11-Month Low Boosting Commodities as Stocks Drop (Bloomberg) The dollar headed for its lowest close in almost a year as signs of slowing growth in the U.S. dimmed prospects for a Federal Reserve interest-rate increase. Stocks fell and commodities extended gains in their best month since 2010. The Bloomberg Dollar Spot Index fell for a second day, while the yen headed for its biggest weekly jump since 2008. Declines in the greenback are proving a boon for raw materials, helping lift gold and silver to 15-month highs. Crude oil has jumped 21 percent this month to more than $46 a barrel in New York. European equities trimmed their biggest monthly advance since November.
- Draghi Challenge Highlighted as Inflation Rate Back Below Zero (Bloomberg) Mario Draghi’s policy challenge was highlighted once again on Friday, with the fastest economic growth in a year overshadowed by a renewed drop in consumer prices. The euro-area inflation rate fell to minus 0.2 percent in April, a worse out-turn than the 0.1 percent decline forecast by economists in a Bloomberg survey. It wasn’t all bad news for the European Central Bank president however, with the economy expanding 0.6 percent in the first quarter and unemployment declining in March to the lowest since 2011.
- China’s Central Bank Raises Yuan Fixing by Most Since July 2005 (Bloomberg) China’s central bank responded to an overnight tumble in the dollar by strengthening its currency fixing the most since a peg was dismantled in July 2005. The reference rate was raised by 0.6 percent to 6.4589 per dollar. A gauge of the dollar’s strength extended its 1 percent slide on Thursday, when the Bank of Japan’s decision to unexpectedly keep monetary policy unchanged sent the yen surging. The offshore yuan weakened 0.12 percent to 6.4914 as of 5:35 p.m. in Hong Kong after gaining 0.3 percent in the last session.
- Yen heads for best week since 2008 as dollar bulls sag (Reuters) The yen built further on Friday on strong gains since a shocking Bank of Japan policy meeting, moving to an 18-month high against the dollar and on course for its biggest weekly gain since the 2008 financial crisis. Poor U.S. growth numbers and the Federal Reserve’s cautious tone this week has squeezed hedge funds still backing a stronger dollar in the face of a market positioned negatively on the U.S. currency for the first time in a year.
- Oil’s Slump-to-Jump at 5-Month High Outpacing Forecasts: Chart (Bloomberg) Oil prices are on track to outperform analysts forecasts for the first time in a year. Brent crude advanced above $38 a barrel earlier this month, climbing past the median forecast for the second quarter and closing at a five-month high of $48.14 on Thursday.
- Forget Justin Trudeau, It’s Oil That’s Driving This Loonie Rally (Bloomberg) It’s giddy times in Canada, with newly installed Prime Minister Justin Trudeau winning rave reviews at home and abroad, the nation’s economy generating some of the best positive surprises in the world and the domestic stock market soaring again. And yet all foreign-exchange traders seem to want to know is what’s the latest price for crude oil. While Canada has made progress to lessen its dependence on the commodity, the local dollar’s correlation to oil has climbed, hovering near record-high levels touched in 2012, according to data compiled by Bloomberg.
- Hackers target Goldcorp Inc, release reams of private data online including payroll and passports (Financial Post) Goldcorp Inc. has fallen victim to a data breach by anonymous hackers who posted reams of the miner’s private information online. The breach includes 14.8 gigabytes of data, according to the Daily Dot website. The leaked data includes payroll information, private budget documents, bank account specifics, employee passport scans and much else, the site said. “It’s a police matter now,” David Garofalo, Vancouver-based Goldcorp’s chief executive, said in an interview Thursday. “What I can tell you is our business is operating normally. And as a public company, we are obliged to disclose all material information and I’m confident we have.”
Overnight markets
- Overview: US 10yr note futures are down -0.0842% at 129-27, S&P 500 futures are down -0.35% at 2065.25, Crude oil futures are up 0.5% at $46.26, Gold futures are up 1.06% at $1279.8, DXY is down -0.49% at 93.297.
US Economic Data
- 8:30 AM: Employment Cost Index, 1Q, 0.6%, est. 0.6% (prior 0.6%, revised 0.5%)
- Personal Income, March, 0.4%, est. 0.3% (prior 0.2%, revised 0.1%)
- Personal Spending, 0.1%, est. 0.2% (prior 0.1%, revised 0.2%)
- Core PCE Price Index, m/m, 0.1%, est. 0.1% (prior 0.1%, revised 0.2%)
- 9:45 AM: Chicago Purchasing Manager, April, est. 52.6 (prior 53.6)
- 10:00 AM: University of Michigan Sentiment Index, April, est. 90 (prior 89.7)
Canadian Economic Data
- 8:30 AM: Industrial Product Price, m/m, -0.6 , est. 0.5% (prior -1.1%, revised -1.0%)
- GDP, m/m, -0.1% , est. -0.2% (prior 0.6%)
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