Market Update
US tsys rebounding from o/n losses after Q2 GDP came in way below expectations 1.2% vs 2.5% exp with Q1 revised lower as well, US 10Y 1.51 (+1bps). GDP shortfall mainly an inventory story as inventories subtracted 1.2% while final sales were 2.4% vs 1.2% in Q1. Strong volume (~2x avg) overnite in TY futures (548K) after BOJ disappointment re stimulus, which led to huge losses in JGBs and pressured core European govt bonds lower. US stock futures lower post GDP, European stocks maintaining slight gains ~0.50% higher. GOCs higher, outperforming after May GDP came in -0.6% – the largest drop since March 2009 on lower oil production. Provi spds opening unch after closing 0.5% tighter yest again, lower cda yields & lack of supply bringing in buyers. Supply unlikely with early Cda close.
News headlines
- Yen Jumps as BOJ Disappointment Sinks Bonds; Europe Stocks Climb (Bloomberg) The Bank of Japan’s most anticipated policy announcement in years left investors underwhelmed, sparking a surge in the yen and sending government bonds and emerging-market stocks lower. Japan’s currency rallied against all of its 31 major peers after the BOJ kept its bond-buying target and policy rate unchanged, opting instead to boost purchases of exchange-traded funds.
- Eurozone GDP growth halves as French economy stalls (BBC News) Eurozone economic growth halved in the second quarter, but the 19-nation single currency area moved away from deflation. GDP rose by 0.3% between April and June, in line with expectations but below 0.6% growth in the first quarter. France, the eurozone’s second-largest economy, saw no growth after expanding by 0.7% in the first quarter. Eurozone inflation rose to 0.2% in July from 0.1% in June as a result of higher food, alcohol and tobacco prices. Data also revealed that the eurozone jobless rate remained at 10.1% in June.The economic growth figures are the first to be published since Britain voted to leave the European Union (EU).
- Brexit Sees U.K. Consumer Confidence Fall Most Since 1990 (Bloomberg) Sentiment among British households fell this month at its fastest pace in more than a quarter century, reflecting uncertainty about the outlook for the economy in the wake of the Brexit vote. The 11-point drop in GfK’s monthly gauge was the most since March 1990, when house prices were falling, interest rates stood at 15 percent and thousands were protesting in London against Prime Minister Margaret Thatcher’s poll tax. GfK said households have become more pessimistic about their personal finances and the economy since the U.K.’s decision to leave the European Union.
- Italian Jobless Rate Rises as More People Enter Labor Market (Bloomberg) Unemployment increased to 11.6 percent from 11.5 percent in May, national statistics agency Istat saidFriday in Rome. The median estimate in a Bloomberg survey of nine analysts called for 11.4 percent in June. The euro-area unemployment rate for June was 10.1 percent, according to a separate release from the European Union’s statistics office.
- TransCanada CEO says climate change policies not the answer for struggling pipelines (FinancialPost) TransCanada Corp. president and CEO Russ Girling, who knows a thing or two about pipelines, says climate change policies aren’t working to lessen the resolve of opponents who block regulatory approvals. “It’s not evident at the current time,” Girling said in an interview Thursday, when TransCanada released its results for the second quarter. “I hope that over time that will change. With folks like these, it doesn’t appear to be affecting their decision making.”
- Air Canada’s profit tops estimates as fuel costs fall (FinancialPost) Air Canada, the country’s largest airline, reported a better-than-expected quarterly profit on lower fuel expenses and cut its cost estimate for the year. Air Canada said it now expected full-year adjusted cost per available seat mile (CASM), which excludes fuel costs, to fall in the range of 2.75-3.75 per cent. The airline had previously estimated a decline of 1.75-2.75 per cent.
- Google-parent Alphabet’s revenue rise beats Street (TheGlobeandmail) Alphabet Inc., Google’s parent, posted a 21.3-per-cent increase in second-quarter revenue, exceeding analysts’ expectations, driven by strong advertising sales on mobile devices and for video content. The company’s shares rose 5 per cent to $804 (U.S.) in after-hours trading on Thursday. Alphabet’s consolidated revenue rose to $21.5-billion in the three months ended June 30, from $17.73-billion a year earlier. Analysts on an average were expecting revenue of $20.76-billion, according to Thomson Reuters I/B/E/S.
- Amazon’s Profits Grow More Than 800 Percent, Lifted by Cloud Services (NYTimes) Amazon reported net income of $857 million in its most recent quarter, the second quarter in a row in which it has shown a record profit. Its net income for those three months was also more than nine times the amount for the same period last year. For the second quarter, which ended June 30, Amazon reported net income of $857 million, or $1.78 a share, up from $92 million, or 19 cents a share, a year ago. Revenue jumped 31 percent to $30.4 billion from $23.19 billion a year ago. The results were well above the average estimate of analysts surveyed by Thomson Reuters of $1.11 a share in earnings and $29.55 billion in revenue.
Overnight markets
- Overview: US 10yr note futures are up 0.1768% at 132-26, S&P 500 futures are down -0.15% at 2161.5, Crude oil futures are down -0.44% at $40.96, Gold futures are up 0.92% at $1353.5, DXY is down -0.91% at 95.856.
US Economic Data
- 8:30 AM: GDP Annualized, 2QA, q/q, 1.20%, est. 2.50% (prior 1.10%, revised 0.80%)
- GDP Price Index, 2QA, 2.20%, est. 1.90% (prior 0.40%, revised 0.50%)
- Personal Consumption, 2QA, 4.20%, est. 4.40% (prior 1.50%, revised 1.60%)
- Core PCE, 2QA , q/q, 1.70%, est. 1.70% (prior 2.00%, revised 2.10%)
- 9:45 AM: Chicago Purchasing Manager Index, July, est. 54 (prior 56.8)
- 10:00AM: University of Michigan Sentiment, July F, est. 90.2 (prior 89.5)
Canadian Economic Data
- 8:30 AM: GDP, May, m/m, -0.60%, est. -0.50% (prior 0.10%)
- GDP, May, y/y, 1.00 %, est. 1.20% (prior 1.50%)
- Industrial Product Price, June, m/m, 0.60%, est. 0.10% (prior 1.10%, revised 1.20%)
- Raw Materials Price Index, June, m/m, 1.80%, est. 3.00% (prior 6.70%, revised 7.00%)
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