US tsys opening lower yet well of o/n lows after ADP, Fed Dudley remarks. Tsys started to climb off the lows pre ADP, which came in above exp (200k vs 190 exp) 10Y 2.085 (+2.5bp), curve ~1bp steeper. Equities higher – Euro stocks up 2.8%, DJ futures +1.1%, USD higher reversing yest declines. Core EU bonds lower on ‘risk-on’ despite Eurozone inflation decline into negative territory (see above), thou UK Q2 GDP was strong (mostly revisions) while German unemployment fell in Aug to 4.5% from 4.6%. GOCs lower in line with tsys, no reaction to Jul GDP (0.8 vs 0.7, June revised lower 0.5 vs 0.6 y/y). Yest saw GOCs widen 3-4 bps across the curve in the US rally, so 10s @ -62bps are the cheapest since late June. Provis opening 0.5bps tighter after some late day screen buying yest, thou we heard there was some selling overnite.
- Equities rally as dismal quarter draws to a close (FT) Global stock benchmarks are rallying as investors seek “bargains” at the end of a dismal quarter for many risk assets. Core government bond yields are rising as the flight to safety reverses, while many recently battered commodities are seeing strong demand.
- Japan on brink of technical recession (FT) Japan is on the verge of a technical recession after data on industrial production raised the prospect of a second consecutive quarter of negative growth.
- Eurozone inflation tumbles below zero for first time in six months (FT) Eurozone inflation slipped below zero in September, a development that is likely to spur further calls for the European Central Bank to ratchet up its €60bn per month asset-purchase programme.
- Pimco Sees Fed ‘Phantom Rate Hike’ at Root of Market Volatility (Bloomberg) Financial-market volatility has climbed as investors wait for a Federal Reserve shift that policy makers have signaled yet failed to deliver, according to Tony Crescenzi at Pacific Investment Management Co.
- Hedge Funds Devise Trades to Benefit From ETFs’ Woes (WSJ) Wall Street is concocting ways to capitalize on potential weak spots in exchange-traded funds, which showed signs of vulnerability during the recent market turmoil.
- Overview: IG24 5Y 86.429/87.025 (-1.461), US 10yr note futures are down -0.19% at 128-18, S&P 500 futures are up +1.07% at 1894.5, Crude oil futures are down -0.49% at 45.01, Gold futures are down -0.88% at $1116.9, DXY is up +0.37% at 96.212.
US Economic Data
- MBA mortgage applications came in this morning at -6.7% for the week ending September 25th, versus prior week 13.9% increase.
- ADP employment change came in at 200K in September compared to 186K in August (Expected 190K).
- ISM Milwaukee is expected at 48.5 in September versus 47.67 in August.
- Chicago purchasing manager index is forecast at 53.0 in September lower than August 54.4.
Canadian Economic Data
- GDP MoM in July increased 0.3% MoM (+0.8% YoY) compared to 0.4% MoM (+0.5% YoY) in June.
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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240