cti2015header-morning comments web

Market Update

Tsys sharply lower, yields 5-6bps higher, 10Y 2.36% weighed by soaring oil on news of OPEC agreement on cut in production by 1.2mln b/d to 32.5mln, this was less than the 1.4mln b/d expected. US data mixed: ADP employment stronger, 216k vs 170k exp, thou Pers inc/spend weaker than exp. GOC yields also trending higher, 10Y 1.56% (+5bps) , Cda/US tighter 2-3bps despite a stronger Sep GDP – 0.3% vs 0.1% exp. Provi spds opening bid, spds 1bp tighter, demand is strong with Dec 1st ext and higher yields enticing buyers. Busy day in corps yest with $4bln in supply – $3bln BNS 5 & 10Y dep note, HSBC $1bln 7Y senior. The 10Y BNS looked somewhat expensive @ 107, yet given BMO 25s trade closer to 95, 12 bps is not bad. This also makes longer dated NVCC look attractive TD 4.859 31/26 @ 205.

News headlines  

U.S. stock futures rise on optimism of big OPEC output cut (Reuters) U.S. stock index futures edged up on Wednesday as oil prices soared on optimism of a bigger-than-expected output cut. Oil prices jumped 8.4 percent after Saudi Arabia’s energy minister said the OPEC and other producers, gathered in Vienna, were close to a deal.

OPEC Agrees to Cut Output by 1.2 Million Barrels a Day (Bloomberg) OPEC reached an agreement to cut oil production by 1.2 million barrels to 32.5 million barrels a day at its ministerial meeting in Vienna, Bloomberg News reports, citing a delegate to the group.

Euro-Area Inflation Accelerates Before Key ECB Decision on QE (Bloomberg) Euro-area inflation accelerated in November, continuing its slow improvement before a crucial European Central Bank meeting next week. Consumer prices rose 0.6 percent from a year earlier, following a 0.5 percent increase in October, the European Union’s statistics office in Luxembourg said on Wednesday. Core inflation was unchanged at 0.8 percent in November. Both readings match the median estimate on Bloomberg surveys of economists.

Steel, Iron-Ore Prices Hammered by China Curbs (WSJ) Steel and iron-ore prices in China plunged on Wednesday after exchanges there lowered the daily trading limit and raised margin requirements in an effort to curb speculation. Shanghai steel-rebar futures for delivery in December pared some losses in late Asia trade to close 5.1% lower at 3,044 yuan ($441) a metric ton. Dalian iron-ore futures for delivery in January ended down 6.0% at 598 yuan a ton.

RBS fails Bank of England stress test (TheGuardian) Royal Bank of Scotland has emerged as the biggest failure in the Bank of England’s annual health check of the UK banking system. The bank, which is 73% owned by taxpayers, issued a plan on Wednesday to Threadneedle Street intended to bolster its financial strength by an estimated £2bn.

Sterling dips after best month vs euro since 2009 (Reuters) Sterling fell by half a percent against the dollar and euro in morning trade in London on Wednesday, with dealers citing month-end rebalancing by investors after its strongest performance against the single currency since early 2009.

Ottawa approves two pipelines, rejects one while imposing tanker ban on northern B.C. coast (Financial Post) Prime Minister Justin Trudeau announced approvals for two major export pipelines Tuesday, while dismissing a third pipeline and imposing a ban on oil tanker traffic on the northern section of B.C.’s coast. Prime Minister Justin Trudeau announced approvals for two major export pipelines Tuesday, while dismissing a third pipeline and imposing a ban on oil tanker traffic on the northern section of B.C.’s coast.

Overnight markets                                                                     

Overview: US 10yr note futures are down -0.562% at 124-13, S&P 500 futures are up 0.34% at 2211.25, Crude oil futures are up 7.87% at $48.79, Gold futures are down -0.41% at $1185.9, DXY is up 0.22% at 101.15, CAD/USD is down -0.33% at 0.747.

US Economic Data 

8:15 AM ADP Employment Change, Nov, 216k, est. 170k (prior 147k, revised 119k)
8:30 AM Personal Income, Oct, 0.6%, est. 0.4% (prior 0.3%, revised 0.4%)
Personal Spending, Oct, 0.3%, est. 0.5% (prior 0.5%, revised 0.7%)
PCE Core, m/m, Oct, 0.1%, est. 0.1% (prior 0.1%)
PCE Core, y/y, Oct, 1.7%, est. 1.7% (prior 1.7%)
9:45 AM Chicago Purchasing Manager, Nov, est. 52.5 (prior 50.6)
10:00 AM Pending Home Sales, m/m, Oct, est. 0.1% (prior 1.5%)
Pending Home Sales NSA, y/y, Oct, (prior 2.0%)
2:00 PM US Federal Reserve Releases Beige Book


Canadian Economic Data 

8:30 AM GDP, m/m, Sep, 0.3%, est. 0.1% (prior 0.2%)
GDP, y/y, Sep, 1.9%, est. 1.8% (prior 1.3%, revised 1.0%)
Quartely GDP Annualized, 3Q, 3.5%, est. 3.4% (prior -1.6%, revised -1.3%)
Industrial Product Price Index, m/m, Oct, 0.7%, est. 0.6% (prior 0.4%)
Raw Materials Price Index, m/m, Oct, 3.3%, est. 3.5% (prior -0.1%)


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