Market update
US tsys lower, curve steeper, 10Y 2.247 (+2.8bps). Core Euro bonds lower despite weaker stocks. Little news o/n – potential merger of Dupont with Dow Chemical the highlight. China stocks higher, PBOC said to be weighing further stimulus as the Yuan fell to a four year low (see above). GOCs are lower, in line with tsys – 10Y ~1bp wider on the curve. US auctions $21bln in reopened 10Y notes later this aft with 10Y ~5bps lower than the Nov auction. Provis opening unch after closing ~2bs wider on no supply.
News headlines
- Dow Chemical and DuPont Are in Advanced Talks to Merge (WSJ) Dow Chemical Co. and DuPont Co. are in advanced talks to merge, in what would be a combination of two of America’s oldest companies that together are worth nearly $120 billion.
- China Sets Yuan at Four-Year Low in ‘Stress Test’ (WSJ) China guided the yuan to its weakest level in more than four years as the country deals with currency outflows and a slowing economy while trying to loosen its grip on the exchange rate.
- China November inflation edges up, but deflation risks dog economy (Reuters) China’s consumer inflation picked up slightly in November but remained well under the government’s 2015 price target of 3 percent, raising concerns that the world’s No. 2 economy could be sucked into a Japan-style deflationary trap.
- Yahoo to Spin Off Core Businesses, Including Yahoo Japan (NYTimes) Yahoo said on Wednesday that it had dropped a plan to spin off its $31 billion stake in Alibaba, the Chinese e-commerce company. Instead, the company will spin off all of its other assets, including its stake in Yahoo Japan, into a new company.
- Kinder Morgan Cuts Dividend by 74 Percent to Conserve Cash (Bloomberg) Kinder Morgan Inc. slashed its full-year dividend by 74 percent as the freefall in oil prices reduced cash flow that the biggest North American pipeline owner needs to cover payments on $41 billion of debt.
- Lululemon Cuts Earnings Forecast as Quarterly Profit Slips (Bloomberg) Lululemon Athletica Inc. on Wednesday posted a 12% decline in its third-quarter profit, trimmed its earnings forecast for the year and gave downbeat guidance for the current quarter.
- Reported Bitcoin Founder’s Sydney Home Raided by Police (WSJ) A report from Wired suggests Craig Steven Wright, an Australian finance geek, and possibly his close friend, Dave Kleiman, who died in 2013, could be the creators of the digital currency bitcoin. Evidence includes Wright’s blogging about writing papers about a cryptocurrency, his ownership of two supercomputers, and the fact Kleiman had a trust holding exactly the same number of bitcoins the rumored creator owned.
Overnight markets
- Overview: IG24 5Y 82.239/82.989 (+0.320), US 10yr note futures are up +0.04% at 126-12, S&P 500 futures are down -0.11% at 2056.50, Crude oil futures are up +0.83% at 37.82$, Gold futures are up +0.29% at $1078.4, DXY is down -0.49% at 97.990.
US Economic Data
- MBA mortgage applications came in this morning at 1.2% for the week ending December 4th, versus prior week -0.2% decrease.
- Wholesale Inventories are forecast at 0.2% MoM in October versus 0.5% MoM for previous month.
- Wholesale trade sales are expected at 0.2% MoM in October lower than September 0.5% increase.
Canadian Economic Data
- There is no major economic data today.
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
Fax: (514)-861-3230