cti2015header-morning comments web

Market Update

US tsys rallying after ADP came in slightly above exp at 177k vs 175k with July revised to 194k from 179k, 10Y note 1.575 (+1bp). Tsys lower overnite in narrow range, rising off the lows in Europe. Fed Rosengren spoke of the risks in keeping rates too low, Fed Evans sounding more dovish saying low inflation anchoring long run rates. Core European bonds lower, short end outperforming after weak Eurozone flash HICP and after crude fell for the 3rd straight dayGOCs lower after June GDP surprised to the upside rising 0.6% vs 0.4% exp. Provis spds unch, Ont 26 87/86.5, Ont 48 99/98.5, QC/Ont 48 5/4.5 unch.

News headlines                                                                                                                                                                                                                             

  • Treasuries Extend Drop in August on Fed Outlook as Dollar Gains (Bloomberg) Treasuries extended their steepest monthly loss since June 2015 and the dollar strengthened against the yen as hawkish rhetoric from Federal Reserve officials over the past two weeks steered financial markets. Ten-year Treasury yields headed for the biggest monthly jump in more than a year as traders almost doubled bets of a September Fed rate increase to 34 percent. The dollar advanced for a sixth day against the yen in the longest winning streak since March. Banks led a second day of gains in European stocks as Commerzbank AG rallied amid merger speculation. Oil trimmed its advance in the best month since April.
  • Oil slips on dollar strength, still set for monthly gain (Reuters) Crude slid on Wednesday, pressured by a strong dollar and high stocks of oil, though prices remained on track for a monthly gain of more than 10 percent. Brent crude futures LCOc1 were trading at $47.94 per barrel at 1126 GMT, down 43 cents from the previous close, while U.S. West Texas Intermediate (WTI) crude futures CLc1 were down 33 cents at $46.02.
  • Canada, China agree to deadline extension in canola export dispute, countries working on long-term solution (Financial Post) Prime Minister Justin Trudeau says existing dockage rules with China on canola exports have been extended beyond a Sept. 1 deadline as the two countries continue to negotiate a long-term solution. The two countries disagree on the level of “dockage” — foreign material such as weeds, other crops and detritus — that should be considered acceptable in Canada’s canola exports to China.
  • Canada applies to join China-backed AIIB, latest U.S. ally to apply (Reuters) Canada will apply to join the China-backed Asian Infrastructure Investment Bank (AIIB), the bank’s president Jin Liqun said on Wednesday, making it the latest ally of the United States to join the new international development bank. The multilateral institution, seen as a rival to the Western-dominated World Bank and Asian Development Bank, was initially opposed by the United States but attracted many U.S. allies including Britain, Germany, Australia and South Korea as founding members.
  • Euro zone inflation stable in August, against expectations of rise (Reuters) Euro zone inflation was stable in August, against expectations of a slight rise, as food, industrial good and services prices increased by less than in July, piling more pressure on the European Central Bank to act. Inflation in the 19 countries sharing the euro was 0.2 percent, the same rate as in July, EU’s statistics agency Eurostat said on Wednesday in its first estimate.
  • Oil Discoveries at 70-Year Low Signal Supply Shortfall Ahead (Bloomberg) Explorers in 2015 discovered only about a tenth as much oil as they have annually on average since 1960. This year, they’ll probably find even less, spurring new fears about their ability to meet future demand.
  • UK house prices rise, consumers regain some confidence after Brexit hit (Reuters) British house price rises picked up speed in August and households recovered some confidence which had plunged after June’s Brexit vote, according to surveys that added to signs of calm among consumers after the unexpected referendum result. However, the increase in house prices was largely driven by a shortage of homes on the market and the outlook depended on longer-term impact on the economy of the vote to leave the European Union, mortgage lender Nationwide said.

Overnight markets

  • Overview: US 10yr note futures are down 0% at 130-30, S&P 500 futures are down -0.14% at 2172.25, Crude oil futures are down -1.04% at $45.87, Gold futures are down -0.34% at $1312, DXY is up 0.15% at 96.2.

US Economic Data

  • 8:15 AM: ADP Employment Change, August, 177k , est. 175k (prior 179k, revised 194k)
  • 9:45 AM: Chicago Purchasing Manager, August, est. 54.0 (prior 55.8)
  • 10:00 AM: Pending Home Sales, m/m, July, est. 0.7% (prior 0.2%)

Canadian Economic Data

  • 8:30 AM: GDP, m/m, June, 0.6%, est. 0.4% (prior -0.6%)
    GDP, y/y, June, 1.1%, est. 1.0% (prior 1.0%)
    Quartely GDP Annualized, 2Q, -1.6%, est. -1.5% (prior 2.4%, revised 2.5%)

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