Commentaires

Market Update

US tsys lower, reversing earlier gains with German bunds after the ‘no’ vote prevailed as expected in Italy’s referendum. US equity futures, higher along with European equities, a decline in the euro to twenty month lows helping exporters. Gold getting hit, falling to a ten month low. US 10Y touched 2.34% briefly in Asia on risk off move after the Italian vote, yet risk markets reversed with core European bonds – the 10Y bund is ~10bps off the early lows at 0.35%. Friday’s non-farm was strong enough to keep the Fed on track for a rate hike next week, today’s ISM non-manufacturing is expected to improve from Oct (the rest of the week is light in terms of data flow. Fed Dudley repeating earlier views that tighter monetary policy is needed over time, and financial conditions have tightened reflecting expecatations of expansionary fiscal policy.  GOCs lower, actually underperforming tsys in the backup – which could be related not only to strength in crude 1% higher above $52.00 but the threat of trade retaliation as highlighted by Trump’s latest ‘tweets’ over the weekend. Provis starting wider after closing last week slightly tighter despite heavy provi/muni supply. Bank supply possible this week after earnings (TD, CIBC..).

News headlines 

Futures up as oil prices top $55 (Reuters) U.S. stock index futures were higher on Monday as oil prices topped $55 a barrel for the first time in 16 months, and investors shrugged off the defeat of a referendum in Italy for constitutional reforms. Futures lost ground slightly on Sunday after Italian Prime Minister Matteo Renzi said he would resign following the rejection. However, world stocks, including Italian shares, reversed course to trade higher on Monday as investors bet against immediate snap elections in the country.

Oil tops $55 for first time in 16 months as OPEC deal fuels buying (Reuters) Brent crude oil prices rose above $55 a barrel on Monday, trading at a fresh 16-month high, on rising prospects of a tightening market after OPEC members agreed on a landmark deal to cut production last week. Monday’s gains take the rally since the agreement was struck on Wednesday to 19 percent for Brent, the highest in almost eight years, and 16 percent for U.S. crude. Brent crude oil futures LCOc1, the global benchmark used to trade oil, soared to their highest since July 2015 to $55.33 a barrel. It last traded at $55.05 a barrel, up 59 cents, or 1.1 percent, at 1133 GMT.

Italy Sinks Into Political Limbo as Defeat Sweeps Renzi Away (Bloomberg) Italy fell into political limbo after Prime Minister Matteo Renzi announced his resignation, with rival parties jockeying to fill the power vacuum following his crushing defeat in a constitutional referendum. Financial markets reversed initial sell-offs as investors came to terms with Renzi’s impending departure. The premier is preparing to hand in his resignation to President Sergio Mattarella on Monday afternoon having signaled that he won’t stay on to help stabilize a caretaker administration.

Euro rebounds after hitting 21-month low on Italian referendum defeat (Reuters) The euro rebounded from 21-month lows on Monday, clawing back almost all the ground it had lost overnight after Italian Prime Minister Matteo Renzi conceded defeat in a referendum on plans to reform the country’s constitution and said he would resign. The single currency tumbled as much as 1.4 percent in Asian trade to hit $1.0505 EUR=, its weakest since March 2015, as investors worried about increased political uncertainty in the euro zone. But by 0855 GMT it had recovered almost all of those losses, trading down 0.1 percent on the day at $1.0650.

Army Blocks Drilling of Dakota Access Oil Pipeline (NY Times) The Standing Rock Sioux Tribe won a major victory on Sunday in its battle to block an oil pipeline being built near its reservation when the Department of the Army announced that it would not allow the pipeline to be drilled under a dammed section of the Missouri River. The Army said it would look for alternative routes for the $3.7 billion Dakota Access pipeline. Construction of the route a half-mile from the Standing Rock Sioux reservation has become a global flash point for environmental and indigenous activism, drawing thousands of people out here to a sprawling prairie camp of tents, tepees and yurts.

UK Supreme Court to hear historic Brexit case (TheGuardian) The government of Prime Minister Theresa May will on Monday seek to overturn a ruling that it must obtain parliamentary approval before triggering Brexit, in a highly-charged case in Britain’s highest court. For the first time ever, all 11 Supreme Court judges will convene for the four-day hearing which threatens to upset May’s timetable for leaving the European Union.

Overnight markets                                                                     

Overview: US 10yr note futures are down -0.2385% at 124-6, S&P 500 futures are up 0.39% at 2200.5, Crude oil futures are up 0.66% at $52.02, Gold futures are down -0.86% at $1167.7, DXY is down -0.12% at 100.65, CAD/USD is up 0.04% at 0.7522.

US Economic Data 

Canadian Economic Data 

There is no major economic data release 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 higher, rising after non farm payrolls came up short of estimates (178k vs 180k) with Oct revised lower, US 10Y 2.40%(-4bps). Tsys higher in Asia on position squaring before employment data as well as Italy referendum this weekend. European rising to session highs after payrolls, outperforming tsys, UK 10Y gilts ~7bps lower, 10Y bunds 4bps lower @ 0.327%. Italian yields 5-6 bps lower before Italy vote Sunday on constitutional reform, a ‘no’ result is expected and PM Renzi has said he would resign should that be the outcome. GOCs opening higher, spds 2bps vs tsys, underpeforming on better than exp Nov Cda employment no.s (10k vs -15k exp) with the unemployment rate down 0.2% to 6.8% the lowest since June . Provis unch yest despite the highest yields since Dec., starting the day unch with supply still likely as today Ont pays out ~4bln Dec 2 cpn pmt.

News headlines  

Stocks Fall With Commodities as Caution Prevails Before Payrolls (Bloomberg) Financial markets are ending the week the way they started, overshadowed by caution, as stocks fall with commodities and a selloff in Treasuries abates. The Stoxx Europe 600 Index extended its first weekly decline in a month and S&P 500 Index futures signaled further losses in U.S. equities as investors shift focus to a report on American payrolls. Oil led raw materials lower as it retreated from a six-week high, the British pound gained against all of its 16 major peers and German bunds ended a three-day slump.

Oil softens after OPEC decision prompts big weekly rally (Reuters) Oil prices fell 1.5 percent to steady at around $53 a barrel on Friday after the biggest weekly rally since 2009 following OPEC’s decision this week to cut crude output in order to rein in a global glut. The market focus now shifts to the implementation and impact of OPEC’s first production agreement since 2008, which will be joined by non-OPEC producers, after data showed output in Russia rose in November to a post-Soviet high.

Fed Should Lead Global Rate Rise, Former BOC Governor Says (Bloomberg) A former Group of Seven central banker says the time has come for the Federal Reserve to lead a coordinated global rate increase. David Dodge, who ran the Bank of Canada between 2001 and 2008, will give a speech in Toronto Friday arguing the best medicine for the world’s economy would be higher interest rates, combined with new government stimulus through spending or tax cuts.

Why 2016 May Be the Year of ‘Peak Housing’ for Canada (Bloomberg) There’s one particularly troubling tidbit to be found amid Canada’s surprisingly strong third-quarter growth: residential investment hit the skids. The annualized 5.5 percent decline in this category was its worst quarterly showing since 2010, notes Macquarie Capital Markets Analyst David Doyle, who views the details of the report as « growing evidence that 2016 will be the year of ‘peak housing’ for Canada. »

China’s Central Bank Is Facing a Major New Headache (Bloomberg) People’s Bank of China Governor Zhou Xiaochuan already has one policy headache with the currency falling to near an eight-year low. He could have an even bigger one next month. That’s when a $50,000 cap on how much foreign currency individuals are allowed to convert each year resets, potentially aggravating capital outflow pressures that are already on the rise. If just 1 percent of China’s almost 1.4 billion people max out those limits, that’s an outflow of about $700 billion — more than the estimated $620 billion that Bloomberg Intelligence estimates indicate has already flowed out in the first 10 months of this year.

National Bank of Canada posts better-than-expected profit (Reuters) National Bank of Canada (NA.TO: Quote), the country’s sixth biggest lender, posted a better-than-expected adjusted profit for the fourth quarter, benefiting from growth in its retail and wealth management businesses. Net income at the bank’s personal and commercial division increased by 7.1 percent to C$196 million ($147 million) in the three months ended Oct.31.

Overnight markets                                                                     

Overview: US 10yr note futures are up 0.2142% at 124-8, S&P 500 futures are down -0.08% at 2190.25, Crude oil futures are down -0.61% at $50.75, Gold futures are up 0.1% at $1170.6, DXY is down 0% at 101.04, CAD/USD is down -0.23% at 0.7525.

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 lower, curve 2bps steeper with the 10Y above 2.40% for the first time since July 2015 as crude rises over $50 after OPEC decided to cut production yest, its first cut in eight years. Tsys pressured since Asia trading, brief reprieve ~4:00AM. German bunds lower, underperforming tsys in the downtrade, bund curve steeper weighed by sov supply from Spain & France also better than exp German & Italy PMIs. GOCs lower, yields 3-5bps higher led by the 10Y @ 1.63% highest since last Nov.  Provis opening 0.5bps tighter after ending the month 0.5bps wider which in the context of 3 provi & 2 muni deals for $1.44bln is not bad. Alberta, periph spds benefitting from rise in crude, Alta/Ont 46 11.5/11 tightest in a month. TD Q4 eps matched exp ($1.22), thou PCLs were lower, CIBC beat est $2.60 vs $2.48, lower PCLs, raised its dividend $1.24 from $1.21.

News headlines

Global Bonds Suffer Worst Monthly Meltdown as $1.7 Trillion Lost (Bloomberg) The Bloomberg Barclays Global Aggregate Total Return Index lost 4 percent in November, the deepest slump since the gauge’s inception in 1990. Bonds in Europe extended declines with their U.S. peers as OPEC’s agreement on Wednesday to cut oil production added to prospects of higher inflation. The reflation trade has been driving markets since Donald Trump’s presidential election win due to promises of tax cuts and $1 trillion in infrastructure spending. All this has prompted investors to dump debt that was offering near-record-low yields and pile into stocks.

Dollar Slips Before Jobs Data as Oil Trades Near $50; Bonds Drop (Bloomberg) Financial markets started the month on an uncertain footing after a dramatic November, with the dollar retreating from a nine-month high, Treasuries falling and European stocks snapping a two-day advance. The U.S. currency declined against most of its 16 major peers before a payrolls report on Friday, while a measure of euro volatility jumped to the highest since before the Brexit vote as investors brace for Italy’s referendum and Austria’s presidential election on Dec. 4 and the European Central Bank’s policy decision in a week’s time. The slump in Treasuries extended the biggest climb in 10-year yields since 2009. European stocks fell with U.S. equity-index futures, while oil advanced after a more than 9 percent rally on Wednesday.

Jobless claims rise to five-month high (Reuters) The number of Americans filing for unemployment benefits rose more than expected last week, hitting their highest level in five months, but the underlying trend remained consistent with a strengthening labor market. Initial claims for state unemployment benefits increased 17,000 to a seasonally adjusted 268,000 for the week ended Nov. 26, the Labor Department said on Thursday. That was the highest level since June and marked the second straight week of increases.

UK factory growth cools as weak pound fuels cost pressures: PMI (Reuters) British manufacturing growth cooled unexpectedly in November as factories grappled with soaring costs caused by sterling’s slump after June’s Brexit vote, even before this week’s jump in oil prices. Thursday’s Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) also suggested the weak pound failed to boost exports by as much as in previous months.

CIBC hikes dividend as 20% profit jump beats expectations (Financial Post) Canadian Imperial Bank of Commerce, Canada’s fifth-biggest lender, reported a better-than-expected quarterly profit, driven by strong performance in its capital markets business. The company said the unit gained from higher equity trading and underwriting revenue, as well as a rise in financing activity in the fourth quarter. Net income from capital markets business surged 52.5 per cent to $276 million in the quarter ended Oct. 31.

TD Bank earnings rise on strong U.S. growth (Financial Post)  Toronto-Dominion Bank, Canada’s second-biggest lender, on Thursday reported a rise in fourth-quarter earnings, in line with market expectations, driven by strong growth at its U.S. retail business. The bank said its earnings rose to $1.22 per share in the fourth quarter to Oct.31, up from $1.14 in the same period the year before, matching the average forecast by analysts according to Thomson Reuters I/B/E/S.

Overnight markets                                                                     

Overview: US 10yr note futures are down -0.2761% at 124-6, S&P 500 futures are up 0.11% at 2201.25, Crude oil futures are up 2.35% at $50.6, Gold futures are down -0.1% at $1172.7, DXY is down -0.33% at 101.17, CAD/USD is down -0.41% at 0.7473.

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