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Market Update

Tsys rebounding from earlier losses on news ECB will not grant Monte Paschi’s requests for more time to raise capital boosting the likelihood of a state bailout. US 10Y 2.404% after hitting 2.44% in NA trading. Core Euro bonds also pairing losses, 10Y bund 6bps lower @ 0.325%, bunds also supported by disappointing French ind production and German trade balance. UK gilts lagging, longs weighed by BOE survey showing inflation expectations jumped the most in six years. Next week supply picks up both in Europe and the US – the US auctions 3, 10Y and 30Y bonds for $56bln. The last 10 & 30Y auctions came in the wake of the Trump victory and were poorly received yet yields are ~50bps higher, yet with the FOMC scheduled for next Wednesday alongside Nov inflation data, successful takedown of supply is not a given. GOCs lower, curve at new wides 2s/10s +3bps @97bps with the GOC 10Y approaching 1.70% high from last Thursday. Provis did better yest after the QC 10Y issue, are opening unch this morning.

News headlines 

Futures rise as ‘Trump rally’ rolls on (Reuters) U.S. stock index futures edged up on Friday, indicating that investors were still eager to buy into the post-election rally that has propelled a host of Wall Street indexes to record highs. The “Trump rally” has been running for the past month as investors bet President-elect Donald Trump’s policies will boost economic growth and inflation. The three main U.S. indexes closed at record levels for the second day in a row on Thursday, while the small cap Russell 2000 and the Dow Transport .DJT hit all-time highs.

Oil Advances as European Stocks Extend Gains; Korean Won Slides (Bloomberg) Oil rose for a second day on signs producers are following through with agreed production cuts while most other financial markets took a breather from a rally that has propelled European stocks to their biggest weekly gain since February. Oil rose for a second day on signs producers are following through with agreed production cuts while most other financial markets took a breather from a rally that has propelled European stocks to their biggest weekly gain since February.

UK trade deficit narrows more than expected in October, construction falls (Reuters) Britain’s trade deficit narrowed more than expected in October after big upward revisions to previous months following an error in how trade in gold was recorded, official figures showed on Friday. Construction output fell slightly on the month and in the three months to October continued its downward trend, the Office for National Statistics said, bucking more positive signs in some industry surveys.

Trump Says China Will Have to Play by Rules Under New Ambassador (Bloomberg) U.S. President-elect Donald Trump vowed that China would soon have to “play by the rules,” as Chinese state media issued its clearest warning yet about its bottom line on Taiwan. “China is responsible for almost half of America’s trade deficit,” Trump said at a rally Thursday evening Des Moines, Iowa. “China is not a market economy … they haven’t played by the rules, and they know it’s time that they’re going to start. They’re going to start. They’re going to.”

Exclusive: ECB rejects Monte Paschi’s request for more time to raise cash – source (Reuters) The European Central Bank has rejected a request by ailing Italian lender Monte dei Paschi di Siena (BMPS.MI) for more time to raise capital, a source said on Friday, in a move that piles pressure on the Italian government to bail out the bank. The country’s third-largest lender, and the world’s oldest, had asked for a three-week extension until January 20 to try to wrap up a privately funded, 5 billion euros ($5.3 billion) rescue plan in the face of fresh political uncertainty.

Trudeau’s Pipeline Approval, OPEC Deal Resurrect the Oil Sands (Bloomberg) Canadian oil sands producers are finally ready to grow again as Cenovus Energy Inc. and Canadian Natural Resources Ltd. announce they are pushing ahead with expansion projects two years into the worst crude slump in decades. Cenovus said Thursday that the company will proceed with its 50,000 barrel a day phase G expansion at its Christina Lake oil sands site. The announcement comes more than a month after Canadian Natural said it was resuming work on its 40,000 barrel a day Kirby North project.

Overnight markets                                                                     

Overview: US 10yr note futures are down -0.1004% at 124-13, S&P 500 futures are up 0.11% at 2245, Crude oil futures are up 1.06% at $51.38, Gold futures are down -0.26% at $1169.4, DXY is up 0.36% at 101.46, CAD/USD is down -0.16% at 0.7593.

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, steeper, US 10Y 2.40% (+5.8bps) after ECB said it would buy E80bln/mth until March 17 but after reduce to E60bln until Dec 17. 10Y hit 2.416% at the lows but buyers have came in before ECB press conference. Core EGBs lower, yields 5-8bps higher, peripheral yields also higher –Italy 10Y +10bps at 1.977%. Euro 5Y5Y inflation forward swaps 1.68%, reached an 11 mth high on Tuesday 1.7%. Draghi saying ECB can increase purchases if necessary, bund curve sharply steeper as ECB lowers maturity bound to 1yr. European stocks regaining some of their initial declines after ECB, Stoxx up 1.0% led by 3.0% gain in financials, with US banks up ~1.0% premkt as US 2/10 curve 4bps steeper. GOCs lower in line with tsys, sharply lower after ECB but bouncing on Draghi press conference. Provis so far not reacting to higher GOC yields, were well offered yest as well, Ont 10Y 84.5/84 vs 82 low last Thurs. The BOC will auction $700mln in reopened Dec 47s at noon, which should be supported by a $790 RRB cpn payment. Breakevens have moved sharply higher ~20bps just since Nov 1st with the real yield curve flatter. The last auction in Sep was well received with a b/c of 2.19x yet was $400mln. With events in the US supporting a rise in inflation expectations and central banks in Cda and the US willing to let economies ‘overheat’ we are positive on BEs.

News headlines 

ECB Extends Bond-Buying at Reduced Pace Until End of Next Year (Bloomberg) The European Central Bank extended its quantitative-easing program until the end of 2017, while reducing the monthly pace of purchases to 60 billion euros ($65 billion) from 80 billion euros starting in April. The Governing Council also said it will step up purchases again or prolong them if needed.

Oil rallies over $50 despite OPEC output cut doubts (Reuters) Oil prices recovered above $50 a barrel on Thursday, bouncing back from the week’s lows as the dollar weakened against major currencies. The U.S. dollar index fell as Treasury bond yields eased and investors eyed next week’s Federal Reserve meeting. A weak dollar makes dollar-denominated oil less expensive for importing countries.

Japan’s economic growth much weaker than expected (Market Watch) Japan’s economy expanded at a much slower pace than initially estimated in the third quarter, as uncertainties overseas and slow wage growth at home continue to crimp growth. The nation’s gross domestic product, the broadest measure of economic activity in the country, grew at an annualized pace of 1.3% in the July-September quarter from the previous three months, compared with a preliminary figure of 2.2%, the Cabinet Office said Thursday.

Chinese trade data shows signs of industrial recovery (Reuters) China’s imports grew at the fastest pace in more than two years in November, fueled by its strong thirst for commodities from coal to iron ore, while exports also rose unexpectedly, reflecting a pick-up in both domestic and global demand. The upbeat data adds to signs of a modest industrial recovery in the world’s largest economies, even as China and other Asian exporters brace for a potential trade war once protectionist U.S. President-elect Donald Trump takes office.

Saudis Are Trying to Figure Out How the Post-Oil Era Works (Bloomberg) Ali Alireza’s family has been trading in Saudi Arabia before it even existed as the kingdom it is today. The 55-year-old managing director of Haji Husein Alireza & Co. Ltd., which sells vehicles from dump trucks to Aston Martin cars, has shared in a boom that turned the desert monarchy into one of the world’s richest countries. He’s been through three oil-price collapses, but the latest has brought the kind of trauma that neither he nor his forebears have ever experienced

Optimism blooms in the oil patch, but the recovery is likely to be slow — and jobless (Financial Post) Some optimism is returning in Canadian oil and gas, but the recovery is expected to be slow, and mostly jobless, as surviving companies remain cautious. Uncertainty remains over oil prices, carbon taxes are on the horizon and competition from better-positions rivals in the United States remains intense. But last week’s OPEC deal to end a two-year market share war, Ottawa’s approval of two oil sands pipelines, and a pickup in winter drilling have gone a long way to feed confidence that the worst of the downturn is over.

Overnight markets                                                                     

Overview: US 10yr note futures are down -0.3255% at 124-13, S&P 500 futures are up 0.11% at 2234, Crude oil futures are up 0.74% at $50.14, Gold futures are down -0.46% at $1172.1, DXY is up 0.64% at 100.87, CAD/USD is down -0.04% at 0.7559.

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

Tsys trading at top of narrow overnite range, Us 10Y -0.025bps 2.365%, curve flatter with the 2Y lagging. Core European bonds higher, UK gilts outperforming as UK ind production fell 1.3% vs 0.2% exp, the largest monthly decline in eight months. ECB decision tomorrow, also supportive, as the central bank is expected to extend its bond purchase program past March. European equities higher for a third day, 3.8% this week which is the best since Sept. Credit Suisse up 7.1% on news the bank will eliminate 4,200 jobs, will cut $1bln in expenses. Monte Paschi up 9% as Italy is considering a bailout of the bank. Italy CDS 13.6bps tighter. GOCs higher led by the 10Y ~1.5bps better on the curve, BOC decision at 10:00am – futures mkts have basically priced out odds of a rate cut  over the past couple of weeks – but as we pointed out yest in our Cda curve comment the 2Y looks cheap and we expect the curve to steepen further post BOC.

News headlines 

Monte dei Paschi bolsters European stocks, ECB looms (Reuters) European shares followed Asian stocks higher on Wednesday, buoyed by reports Italy would step in to rescue troubled bank Monte dei Paschi and expectations the European Central Bank would extend its bond-buying stimulus scheme this week. Italian government bond yields fell, narrowing the premium investors demand to hold them rather than benchmark German debt, to its tightest for about a month.

China Nov forex reserves fall more than expected to $3.05 trillion, lowest since 2011 (Reuters) China’s foreign exchange reserves fell for a fifth straight month in November and by more than expected to the lowest since March 2011, as authorities struggled to shore up the sliding yuan currency in the face of a relentlessly rising dollar. Reserves fell by $69.06 billion last month to $3.052 trillion, central bank data showed on Wednesday, following a drop of $45.7 billion in October.

U.K. Manufacturing Unexpectedly Drops Most in Eight Months (Bloomberg) U.K. manufacturing output unexpectedly fell the most in eight months in October as pharmaceuticals slumped. The 0.9 percent drop compared with forecasts for a 0.2 percent increase and marked the biggest decline since February. Industrial production fell 1.3 percent, driven by a slide in oil and gas extraction. That was due to a shutdown of Buzzard, one of the U.K.’s biggest fields, the Office for National Statistics said on Wednesday.

Mexico Overtakes Canada as No. 2 U.S. Exporter Ahead of Trump (Bloomberg) Mexico is overtaking Canada as the No. 2 exporter of goods to the U.S. this year, in a sign of how economic ties have deepened between the two countries even as the relationship is being questioned by President-elect Donald Trump. Shipments from Mexico totaled $245 billion in the first 10 months of the year, according to Commerce Department figures released Tuesday, ahead of Canada’s $230 billion. If the trend continues, it would be the first time ever the U.S. bought more imports from its neighbor to the south. The two countries ended 2015 tied in exports to the U.S.

Hudson’s Bay Co looks to cut costs after tough quarter; shares hit all-time low (Financial Post) After a tough third quarter Hudson’s Bay Co. is seeking to cut expenses as the veteran retailer’s shares bottomed out at the lowest point yet since going public for a second time in 2012. Chief executive Jerry Storch said Tuesday the owner of Saks, Hudson’s Bay and Kaufhof in Germany is keen to focus on finding “non-customer facing” efficiencies after the company reported a wider than anticipated loss and a four per cent dip in sales at stores open for more than a year, citing weakness in women’s apparel and luxury retail.

More Canadians are going bust as low interest rates fuel debt binge (Financial Post) A new Equifax Canada report says low interest rates and falling oil prices drove up consumer debt and delinquency rates in the third quarter. The credit reporting agency found that average debt increased by 3.6 per cent to $22,081 in the quarter ended Sept. 30 compared to the same period last year. As of the third quarter, Canadian consumers owed $1.702 trillion compared to $1.587 trillion a year earlier.

Overnight market

Overview: US 10yr note futures are up 0.1381% at 124-21, S&P 500 futures are down -0.1% at 2207.75, Crude oil futures are down -1.14% at $50.35, Gold futures are up 0.3% at $1173.6, DXY is down -0.03% at 100.46, CAD/USD is up 0.03% at 0.753.

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