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Market Update

US tsys higher with the long end leading, US 10Y 2.444 (-2.7bps) after Nov retail sales came in short of expectations 0.1% vs 0.3% with Oct revised lower as well thou PPI rose 0.4%  vs 0.1% exp. Core Euro bonds also higher, supported by the Bank of Japan’s buy operation in the long end of the JGB curve, said to counter some of the latest increase in yields. 10Y gilt yields 4bps lower @1.41% as UK employment fell for the first time this year in Oct, thou average weekly earnings were strong @ 2.5%. GOC yields lower, 2s10s ~3bps flatter with the 10Y 1.71%. Provis starting 0.5bps tighter after closing another 1.5bps tighter yest. Alberta priced $600mln longs at 103 (9vs ont) -opening 102.5/102. In IG, IPL was in the mkt with a 10Y @168 OTC /173 vs 26s, which looked 10-15bps cheap, it closed 166 bid in secondary trading. Fairfax priced $450mln 10Ys @ 295. We expect the GOC mkt to be fairly range bound until the FOMC decision at 2:00 and Yellen press conference at 2:30 . An updated Fed ‘dot’ plot will be released alongside the decision, along with a new series of econ projections (SEP).

News headlines 

Stocks Fall, Bonds Rise as Caution Prevails Before Fed Meeting (Bloomberg) Caution pervaded markets before the Federal Reserve’s expected interest-rate hike later Wednesday, with European stocks slipping from an 11-month high and government bonds advancing. Crude retreated on industry data showing U.S. stockpiles increased. The Stoxx Europe 600 Index retreated before the conclusion of the Fed’s two-day meeting, as investors awaited clues on the likely path of rates in 2017.

OPEC points to larger 2017 oil surplus, unless cuts implemented (Reuters) OPEC pointed on Wednesday to a growing oil supply surplus next year unless members implement their deal to curb output from record levels and outside producers also deliver on cutback pledges made at the weekend.

Countdown to first Fed hike in a year under way, but focus shifting to 2017 (Reuters) World stocks and the U.S. dollar edged lower, while government bond yields fell, with investors certain the Federal Reserve will lift interest rates for the first time in a year on Wednesday but less so about what it may do in 2017. European shares fell 0.4 percent and U.S. stock futures were flat, suggesting a cautious start to Wall Street trading after Tuesday’s stock market rally to all-time highs.

U.K. Employment Declines for First Time in More Than a Year (Bloomberg) U.K. employment fell for the first time in more than a year in the three months through October as the labor market showed some signs of weakness. The number of people in work fell by 6,000 to 31.76 million people, the Office for National Statistics said on Wednesday. While the decline was small, and the jobless rate was unchanged at 4.8 percent, the statistics office said the labor market “appears to have flattened off in recent months.”

Oil prices fall on rising U.S. crude stocks, OPEC output concerns (Reuters) Oil prices fell on Wednesday following a reported rise in U.S. crude inventories and an estimate that OPEC may have produced more crude in November than previously thought, potentially undermining a planned output cut. International Brent crude futures were down 58 cents at $55.14 per barrel at 1054 GMT.

IEA warning to high-cost producers: ‘Think twice’ before sanctioning projects as high oil prices won’t last (Financial Post) A report published Tuesday disputed the renewed optimism being felt among high-cost producers such as Canada’s oilsands, saying OPEC’s deal to cut output is only a short-term boon for oil prices. In its monthly oil market report, the Paris-based International Energy Agency reiterated that the recent production cut between OPEC and non-OPEC members is a six-month agreement that could easily be revised in mid-2017

Overnight markets                                                                     

Overview: US 10yr note futures are up 0.3026% at 124-10, S&P 500 futures are down -0.13% at 2264.75, Crude oil futures are down -1.49% at $52.19, Gold futures are up 0.47% at $1164.5, DXY is down -0.29% at 100.78, CAD/USD is down -0.21% at 0.7632.

US Economic Data

Canadian Economic Data

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

Market Update

US tsys trading higher, US 10Y 2.451% (-2bps), curve flatter supported by move in European bonds.  European investors spending cash which had piled up in the selloff as EGB supply drops off into year end.  Gold trading lower, European stocks ~1.0% higher fairly broad based rally.  UK gilts 4-5bps lower despite higher than exp rise in UK inflation to 2 yr high– CPI 1.2% vs 0.9% exp in Nov, yet prices bolstered by reinvestment flows. US eco calendar light with only import prices, the US auctions $12bln in 30Y bonds at 1:00pm with the WI 30Y 3.117% vs 2.90% at previous auction Nov 10th. The latest JPM survey showed shorts among active clients the highest since Sept 2014. This comes after latest CFTC COT report which had large specs at record short Eurodollar futures. GOCs higher, 10Y 1.70% (-3bps), provis well bid to start after closing 1-1.5bps tighter yest led by longs. This morning Ont 48s trading down @ 94, 26s @ 81. CMB 5Y expected to price this morning, Dec 21s @ 44 – now 44/43.5 on 1.25/21, the new issue will have cpn closer to 1.525, we are sold out.

News headlines 

Stocks Rally as Italian Banks Lift Europe, Yen Falls Before Fed (Bloomberg) Global stocks advanced, and the yen fell, amid optimism the Federal Reserve’s meeting this week won’t unsettle markets as the central bank boosts interest rates to reflect a strengthening economy. Italian equities and bonds surged on bank recapitalization plans. Futures on the S&P 500 Index signal a rally that pushed it to a record last week has more to run.

Oil prices rise as Middle East producers confirm supply cuts (Reuters) Oil prices rose on Tuesday, supported by strong demand in Asia and supply cuts by Abu Dhabi, Kuwait and Qatar as part of production curbs organized by OPEC and other exporters. But traders said the market was pressured by investors closing financial positions that profited from strong gains the day before.

China property sales growth slides to lowest since November 2015 (Reuters) Home sales in China slowed sharply in November in the wake of government cooling measures, and new property investment slowed significantly from recent record levels – suggesting a key economic driver could be losing steam. Property sales growth slid in November to 7.9 percent from a year ago, its lowest since November 2015, and well short of October’s 26.4 percent increase.

UniCredit Plans $13.8 Billion Stock Sale, Cuts to Boost Profit (Bloomberg) UniCredit SpA plans to raise 13 billion euros ($13.8 billion) in a rights offer, betting that a balance-sheet cleanup and cost cuts will persuade investors that Italy’s biggest bank can restore profitability even without much revenue growth.

German Investor Confidence Unchanged as Economy Gathers Pace (Bloomberg) German investor confidence remained unchanged in a sign that Europe’s largest economy is on track to end the year on a strong note. The ZEW Center for European Economic Research in Mannheim said on Tuesday that its index of investor and analyst expectations, which aims to predict economic developments six months ahead, held at 13.8. Economists in a Bloomberg survey predicted an increase to 14.0. A gauge for current conditions rose to the highest level in more than a year.

UK inflation hits highest level in more than two years (TheGuardian) UK inflation climbed to 1.2% in November, the highest level in more than two years, in a sign that the fall in the value of the pound since the Brexit vote is fuelling a rise in the cost of living. The rise in the consumer prices index, from 0.9% in October, was largely driven by higher petrol and clothing prices according to the Office for National Statistics. November’s rate was the highest since October 2014, and slightly above the 1.1% forecast by City economists.

Morneau pulls Bank Act changes from budget bill after objections from Quebec, Senate (GlobeAndMail) Finance Minister Bill Morneau has agreed to remove controversial changes to the Bank Act from his latest budget bill in response to strong objections from Quebec and some Senators. The Quebec government opposes a section of Bill C-29 that asserts the federal government’s exclusive jurisdiction over Canada’s banking sector. Quebec insists that provinces have constitutional authority in areas such as consumer protection for bank customers and warns the bill would impose weaker standards than those currently in place provincially.

Overnight markets                                                                     

Overview: US 10yr note futures are up 0.2142% at 124-9, S&P 500 futures are up 0.36% at 2258.5, Crude oil futures are up 0.47% at $53.08, Gold futures are down -0.09% at $1164.7, DXY is down -0.11% at 100.92, CAD/USD is down -0.2% at 0.763.

US Economic Data 

Canadian Economic Data 

There is no major economic news for 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, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

Market Update

Tsys sharply lower after overnite spike in oil on new OPEC cuts, yet so far 2.50% bringing in buyers, tied to selling of yen according to MNI. Overnite the 10Y hit 2.525% in Tokyo as Saudi agreed to cut more oil and non OPEC members are ready to sign on as well. JGB curve ~8bps steeper, long yields highest since March on BOJ taper rumours. GOCs lower actually underperforming in the pullback, GOC 10Y above 1.75% curve 2bps steeper. Provis starting well bid after ending the week unch.  Supply still likely before the holidays.

News headlines 

Crude Soars as Output Deal Weighs on Bonds; China Shares Tumble (Bloomberg) Crude oil surged to the highest in 17 months amid efforts to cut production, pushing up the outlook for global inflation and sending 10-year Treasury yields above 2.5 percent for the first time since October 2014. Chinese equities tumbled. Oil jumped about 4 percent in New York and London after Saudi Arabia signaled it will cut output by more than previously agreed amid a weekend deal to tackle oversupply with competitors such as Russia. Longer-dated securities led declines as government bonds around the world tumbled, while climbing energy shares bucked a drop in Europe’s wider benchmark stock gauge. China’s Shanghai Composite Index sank the most since June as a gauge of smaller companies in Shenzhen plunged more than 5 percent.

Japan October core machinery orders rise, beating expectations (Reuters) Japan’s October core machinery orders rose for the first time in three months to beat expectations, government data showed – a tentative sign of a pickup in capital expenditure. Core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, rose 4.1 percent in October from the previous month, Cabinet office data showed on Monday. The results handily beat the economists’ median estimate of a 1.0 percent increase.

Asian banks provide 800 mln euros in loans to Russia’s Gazprom (Reuters) Japan’s Mizuho Bank, Sumitomo Mitsui Banking Corp and JPMorgan Chase & Co have provided 800 million euros ($848 million) in loans to Gazprom, the Russian gas giant said in a statement on Monday.

Merkel, Tsipras to discuss Greek financial situation December 16 (Reuters) German Chancellor Angela Merkel will hold talks with Greek Prime Minister Alexis Tsipras in Berlin on Friday, one day after a summit of European Union leaders in Brussels, a government spokeswoman said on Monday.

Canadian oil producers hope to OPEC-proof their higher spending plans for next year (Financial Post) Following an extremely challenging two years of persistently low oil prices, Canadian energy companies are beginning to increase spending again, though executives don’t expect a dramatic rebound in crude prices.

Quebec Paves Way for Oil, Gas Exploration With New Energy Plan (Bloomberg) Quebec’s legislature passed a bill that will pave the way for more oil and gas exploration, providing a boost to drillers such as Junex Inc. while drawing criticism from environmental, aboriginal and citizen groups.

Overnight markets

Overview: US 10yr note futures are down -0.1512% at 123-27, S&P 500 futures are down -0.01% at 2254.5, Crude oil futures are up 4.19% at $53.66, Gold futures are up 0.06% at $1162.6, DXY is down -0.45% at 101.13, CAD/USD is down -0.39% at 0.7618.

US Economic Data 

Canadian Economic Data 

There is no major economic news for 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, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230