Market Update
US tsys lower, US 10Y 1.58 (+2bps), core Euro bonds higher led by 10Y UK gilts, German bunds also higher on lower CPI. Tsys mostly lower overnite on highe than avg volume, but cut losses after Fed Fischer admitted pace of rate increases depends on data. GOCs lower, lagging the rebound in tsys after July IPPI cam ein above exp at +0.2% (-0.1% exp), yet the current account came in at $19.9bln, the widest since 2010 showing ongoing weakness in goods and services exports. Ontarios getting hit to start, Ont 46s @ 100.5 after widneing 0.5bps yest, longs underperforming. Supply expectations and lower cda yields weighing on spreads here.
News headlines
- Dollar Advances as Treasuries Drop on Rate Outlook; Stocks Rise (Bloomberg) The dollar strengthened and Treasuries fell as Federal Reserve Vice Chairman Stanley Fischer said the U.S. economy was close to full employment, reinforcing speculation that policy makers are moving toward raising interest rates. The Bloomberg Dollar Spot Index climbed to a three-week high as Fischer, who last week suggested that interest rates may rise as soon as September, said Tuesday in a Bloomberg Television interview that officials can choose the pace of rate increases based on economic data.
- Fed’s Fischer says U.S. job market ‘very close’ to full strength (Reuters) The U.S. job market is nearly at full strength and the pace of interest rate increases by the Federal Reserve will depend on how well the economy is doing, Fed Vice Chairman Stanley Fischer said on Tuesday. In an interview with Bloomberg TV, Fischer did not comment on the timing of the next Fed rate hike but said « we choose the pace on basis of data, » and that U.S. « employment is very close to full employment. »
- Japanese household spending, joblessness fall (Market Watch) Japanese household spending fell again in July despite continued improvement in the labor market, underlining the conflicting signs of progress in Prime Minister Shinzo Abe’s efforts to generate sustained growth. Spending fell 0.5% from a year earlier in July, down for the fifth month in a row and the 10th time in the past year, according to data released Tuesday by the internal affairs ministry. The figure is adjusted for price changes. Economists surveyed by The Wall Street Journal and the Nikkei expected a 1.0% contraction from a year earlier.
- Euro zone monthly economic sentiment falls more than expected (Reuters) Economic sentiment in the 19 countries sharing the euro fell in August to its lowest level since March, a further indication that morale is weakening after Britain voted to leave the European Union. The European Commission’s euro zone Economic Sentiment Indicator (ESI) fell to 103.5 in August from 104.5 in July, its lowest level since March and well below the 104.1 forecast in a Reuters poll of 38 economists. Estimates ranged from 103.0 to 104.9.
- China’s Xi urges boost to economic reforms (Reuters) China’s key reforms have been smooth over the last three years, but implementation needs to be faster, Xinhua news agency said, citing a statement from a meeting chaired by President Xi Jinping on Tuesday. Xi called for solid efforts to advance reforms, with more focus needed on the economy, at the meeting of the Central Leading Group for Deepening Overall Reform. Some analysts say China’s reforms, particularly those of state firms, have been slower than expected.
- France, joining German Economy Minister, urges halt to trade talks with U.S. (Reuters) Current transatlantic trade talks should be halted and a new set started, France’s trade minister said on Tuesday, adding his voice to calls from within Germany for an end to the negotiations. Matthias Fekl said he would request a halt to negotiations with the United States over the Transatlantic Trade and Investment Partnership (TTIP) on behalf of France at next month’s meeting of European Union trade ministers in Bratislava.
- Bank of Nova Scotia hikes dividend as third-quarter profit rises to $1.9 billion, credit losses decline (Financial Post) Bank of Nova Scotia reported on Tuesday third-quarter earnings that were ahead of market expectations, driven by growth in its domestic and international banking businesses. Canada’s third-biggest lender reported earnings per share of $1.55, up from $1.46 the year before. Analysts had on average expected earnings of $1.48 per share, according to Thomson Reuters I/B/E/S.
Overnight markets
- Overview: US 10yr note futures are down -0.0829% at 131-27, S&P 500 futures are down -0.06% at 2178, Crude oil futures are up 0.55% at $47.24, Gold futures are down -0.41% at $1321.6, DXY is up 0.3% at 95.862.
US Economic Data
- 10:00 AM: Consumer Confidence Index, August, est. 97.0 (prior 97.3)
Canadian Economic Data
- 8:30 AM: Industrial Product Price Index, m/m, July, 0.2%, est. -0.3% (prior 0.6%)
- Raw Material Price Index, m/m, July, -2.7%, est. -1.2% (prior 1.8%)
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