Comments

Market Update

– Tsys moving lower, US 10Y 1.752% (1.3bps) despite Sept payrolls coming in weaker 156k vs 170k and AHE up 0.2% vs 0.3% exp, thou the part rate did tick up to 62.9%. Tsys down o/n with UK gilts which sold off sharply again on nervousness over a ‘hard Brexit’.  Sterling lower after a ‘flash crash’ sent the ccy down 6.1% to 31-year lows before stabilizing. German 10Y bund yield back above zero, better than exp German IP also seen weighing along with gilt weakness.  GOC yields higher after Cdn empl rose 67k in Sep – the one monthlargest gain since Apr 2012vs  and the unemp rate ??. USDCAD higher on lower crude , stronger USD. Four Fed speakers scheduled today . BOC Deputy Wilkins in speech in Trois Rivieres said inflation risks are still tilted to the downside despite the recovery in oil prices, as material slack and uncertainty exist, thou expected fiscal stimulus in Cda/US will certainly support the recovery. Provis closed tighter yest, opening.

News headlines                                                                                         

–Dollar Gains as Stocks Fall Before Payrolls; Pound in Meltdown (Bloomberg) The dollar climbed to 10-week high and equities retreated before American payrolls data that may bolster the case for the Federal Reserve to raise interest rates this year. The pound tumbled as much as 6.1 percent. The Bloomberg Dollar Spot Index strengthened for a fifth day as better-than-estimated economic data this week fueled bets for rate increases. Stocks fell with bonds and gold headed for its worst week in almost two years. The pound failed to recover all of of its losses after the biggest intraday slide since the Brexit referendum. Oil held above $50 a barrel.

–China Sept forex reserves fall more than expected to $3.166 trln (Reuters) China’s foreign exchange reserves fell to $3.166 trillion at the end of September, the central bank said on Friday, below forecasts. Economists had expected reserves to ease to $3.18 trillion from $3.19 trillion in August. China’s gold reserves rose to $78.169 billion at the end of September, from $77.18 billion the previous month, the People’s Bank of China said on its website.

–Flash Crash of the Pound Baffles Traders With Algorithms Being Blamed (Bloomberg) During two chaotic minutes of Asian trading, the pound plunged the most since the Brexit referendum in June, with traders saying computer-initiated sell orders exacerbated the slump. The 6.1 percent drop drove sterling to a 31-year low of $1.1841, according to composite prices compiled by Bloomberg of contributions from dealers. Traders speculated the crash might have been sparked by human error, or a so-called “fat finger,” with algorithms adding to selling pressure at a time of day when liquidity is relatively low.

–U.S. nonfarm payroll job growth seen pushing case for Fed hikes (Reuters) U.S. employment growth likely picked up in September, putting pressure on the Federal Reserve to raise interest rates and signaling that steam could be building in the economy ahead of America’s presidential election. Nonfarm payrolls are expected to have risen by 175,000 last month from 151,000 in August, according to a Reuters survey of economists.

–Bank of Canada backs Ottawa’s bid to cool housing market (TheGlobeAndMail) Bank of Canada officials are giving a thumbs-up to the Trudeau government’s efforts to cool the country’s debt-fuelled housing market. “Over time, the measures announced by the federal government … will help mitigate risks to the financial system posed by household imbalances,” senior deputy governor Carolyn Wilkins said Thursday in Trois-Rivières, Que. But Ms. Wilkins appeared to play down suggestions from some economists that a federal mortgage insurance crackdown gives the central bank flexibility to cut interest rates again if the economy falters.`

–Thomson Reuters launches new technology centre in Toronto, says it will create 400 jobs (Financial Post) Thomson Reuters Corp. announced Friday its intention to open a new technology centre in downtown Toronto, which it says will create some 400 jobs in the tech sector in the next two years. To be christened the Toronto Technology Centre, the opening will increase the media conglomerate’s 1,200-strong workforce in Canada by a third. The company said it has plans to add 1,500 jobs over an unspecified period of time, and will begin recruiting in the local market immediately.

Overnight markets

-Overview: US 10yr note futures are up 0.0962% at 130-3, S&P 500 futures are up 0.06% at 2157.75, Crude oil futures are down -0.14% at $50.37, Gold futures are up 0.72% at $1262, DXY is up 0.06% at 96.819.

US Economic Data

-8:30 AM: Change in Nonfarm Payrolls, Sep, 156k , est. 172k (prior 151k)

Change in Manufacturing Payrolls, Sep, -13k , est. -4k (prior -14k)

Unemployment Rate, Sep, 5.0%, est. 4.9%  (prior 4.9%)

Labor Force Participation, Sep, est. 62.9% (prior 62.8%)

Average Hourly Earnings, m/m, Sep, 0.2%, est. 0.3% (prior 0.1%)

Average Hourly Earnings, y/y, Sep, 2.6%, est. 2.6% (prior 2.4%)

-10:00 AM: Wholesale Inventories, m/m, Aug F, est. -0.1% (prior -0.1%)

Wholesale Trade Sales, m/m, Aug, est. 0.1% (prior -0.4%)

-15:00 AM: Consumer Credit, Aug, est. 16.5b (prior 17.713b)

Canadian Economic Data

-8:30 AM: Unemployment Rate, Sep, 7.0%, est. 7.0% (prior 7.0%)

Net Change in Employment, Sep, 67.2k, est. 7.5k (prior 26.2k)

Participation Rate, Sep, 65.7% , est. 65.5% (prior 65.5%)

-10:00 AM: Ivey Purchasing Managers Index, Sep, est. 53.1 (prior 52.3)

-10:30 AM: BoC Senior Loan Officer Survey, 3Q, (prior 5.00)

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 lower after 8:30 claims data, ‘risk on’ as Euro stocks rise, crude at new highs WTI above $50 for first time since June 24th , US 10Y 1.72 (+1.5bps). Euro stocks higher led by fincls – DB up another 2.0% despite news the Bank mismarked loans. Core Euro bonds lower after rising initially after ECB Sep 8 minutes showed the CB was ready to add to QE beyond March 2017 if needed. GOCs lower led by the 10Y sector, 10Y rolls wider, the M22/5Y roll also continuing to widen post auction yest, now 5.5bps. Decent bid for longs, 10s30s ~1bp flatter @ 65.8bps. Provis wider after closing 0.5bps wider yest, this morn Ont48s traded down at 95.5, Ont 26s 84.5/84, Alberta longs tradign up this morn on strength in crude.

News headlines

–Fed Rate Bets Boost Dollar, Damp Treasuries; Europe Stocks Fall (Bloomberg) The Federal Reserve is back in the financial-market spotlight, with strengthening speculation that an interest rate hike is imminent buoying the dollar and spurring the yield on two-year Treasuries to the most in 10 years versus German notes.

–Oil steady near 2016 highs after U.S. inventory drop (Reuters) Oil prices were steady on Thursday, underpinned by a surprisingly large drop in U.S. inventory levels the previous day to stay within sight of this year’s highs hit in June. Brent crude futures were unchanged at $51.86 per barrel at 0913 GMT, after hitting a high of $52.09 the previous day. U.S. futures were down 5 cents at $49.78 a barrel

–Strong German data allay growth concerns, Merkel promises tax cuts (Reuters) Strong demand from euro zone countries and domestic customers drove a bigger-than-expected rise in German industrial orders in August, suggesting factories will contribute to growth in Europe’s economic powerhouse in coming months.

–UK’s economic productivity finally returns to pre-crisis peak: ONS (Reuters) Britain’s economic productivity – the key driver of living standards – has finally clawed back the ground it lost during and after the financial crisis, but remains almost a fifth below where it might have been had the crisis never happened.

–Deutsche Bank’s $14 Billion Scare (Bloomberg) This summer, U.S. Justice Department officials working on a mortgage securities investigation of Deutsche Bank AG expected the bank to settle the matter for $2 billion to $3 billion, according to people with knowledge of the matter.

–Monte Paschi Said to Plan Debt-Swap Deadline Before Italian Poll (Bloomberg) Banca Monte dei Paschi di Siena SpA intends to rush through provisional bondholder agreements in a debt-for-equity swap before Italy’s Dec. 4 referendum, according to people with knowledge of the matter.

–End of Canada’s ‘unique’ mortgage system means higher bank costs (Financial Post) The days when Canada’s banks could offload much of the risk of underwriting mortgages onto taxpayers may be drawing to a close. Canadian Finance Minister Bill Morneau disclosed plans Monday to begin consultations on sharing the risk of mortgage default with the country’s lenders. The move was part of a package of measures designed to stabilize the housing market after years of soaring prices in Vancouver and Toronto.                                                                          

Overnight markets

-Overview: US 10yr note futures are down -0.084% at 130-4, S&P 500 futures are down -0.16% at 2149.75, Crude oil futures are up 0.68% at $50.17, Gold futures are down -0.52% at $1262, DXY is up 0.36% at 96.469.

US Economic Data 

-8:30 AM: Initial Jobless Claims, Oct 1^st,  249k, est. 256k (prior 0.8%)

-Continuing Claims, Sep 24^th, 2058k, est. 2081k (prior 2062k, revised 2064k)

-9:45 AM: Bloomberg Consumer Comfort Index, Oct 2^nd, (prior 41.6)

Canadian Economic Data

-8:30 AM: Building Permits, m/m, Aug, 10.4%, est. 1.0% (prior 0.8%, revised 3.4%)

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 slightly higher in NA trade, US 10Y 1.685 (-0.3bps), mostly ignoring the small miss in the ADP empl (154k vs 165k exp). Tsys firmer in Asia yet fell after Fed Evans said he was ‘comfortable’ with rate hikes this yr. Tsys also pressured on the back of lower bunds on latest ECB ‘taper tantrum fears’ & higher crude (49.60 + 1.9%). Short tsys lagging on higher 3M libor set, +.00036 at 0.8679%. GOCs higher, outperforming tsys ~1bp in 10s, despite news exports rose for a third month in August, with the trade deficit falling to $1.9bln from $2.2bln in July. BOC auction at noon – $3.8bln in new March 2022s with the WI/5Y roll at 4.9bps this morn, which seems cheap given the J22/5Y roll is barely 0.3bps higher at 5.3bps. The benchmark 2s5s curve has steepened ~4bps over the week, yet this wouldn’t account for the ~1.5bp cheapening in the WI roll over the period. Other old 5Y rolls (i.e. Sep21/Mar21) are closer to 3bps. Provis opening 0.5bps wider on the bid, after closing 0.5bps better on higher Cda yields, lack of supply.

News headlines                                                                                                   

–European Stocks Fall With Emerging Markets on Central Bank Angst (Bloomberg) European stocks fell with emerging markets as the prospect of monetary policy turning less accommodative in the world’s biggest economies damped appetite for higher-yielding assets. The Stoxx Europe 600 Index dropped for the first time in seven days and the MSCI Emerging Markets Index halted a two-day rally after Bloomberg News reported an informal consensus was building in the European Central Bank that quantitative easing will need to be tapered once a decision is taken to end the program.

–Oil hits highest since June on possible U.S. inventory drop (Reuters) Oil rose towards $52 a barrel on Wednesday, hitting its highest since June, supported by an industry report that U.S. inventories probably fell for a fifth straight week and OPEC’s deal to cut supply. The American Petroleum Institute (API) said on Tuesday that U.S. crude inventories dropped 7.6 million barrels, which would be the fifth straight weekly decline if confirmed by U.S. Energy Information Administration (EIA) data on Wednesday. [API/S]

–Gold drops below US$1,300 as central bank tightening looms (Financial Post) Gold slipped below US$1,300 an ounce Tuesday, surrendering all the gains it had made since the surprise Brexit vote in June sent it on a rally. Bullion’s capitulation came alongside a “day of setbacks” for gold miners, with Barrick Gold Corp. announcing a longer suspension of operations at its Argentina mine and Goldcorp Inc. shutting down a mine in Mexico after a week-long blockade.

–Fed’s Evans “fine” with Dec hike if data stays firm (Reuters) Chicago Federal Reserve Bank President Charles Evans said he would be “fine” with raising U.S. interest rates by year end if U.S. economic data continued to come in firm, though any further moves would need to see inflation accelerating.

–BOJ Kuroda: interest rates would rise when 2 percent price goal is met (Reuters) Bank of Japan Governor Haruhiko Kuroda said on Wednesday that interest rates would rise when the central bank’s 2 percent inflation target is achieved although it’s unlikely borrowing costs would increase anytime soon.

–Global Banks Fight Back on Brexit, Warning $51 Billion at Stake (Bloomberg) Britain crashing out of the European single market could cost banks and associated businesses in the U.K. almost 40 billion pounds ($51 billion) in lost revenue, undermining a key sector of the economy, an industry report warned on Tuesday.

Overnight markets

–Overview: US 10yr note futures are down -0.0718% at 130-13, S&P 500 futures are up 0.22% at 2149.5, Crude oil futures are up 1.93% at $49.63, Gold futures are up 0.53% at $1276.4, DXY is down -0.04% at 96.133.                                                                  

US Economic Data

-8:15 AM: ADP Employment Change, Sep, 154k, est. 165k, (prior 177k, revised 175k)

-8:30 AM: Trade Balance, Aug, -40.7b, est. -39.2b (prior -39.5b)

Int’l Merchandise Trade, Aug, -1.94b,  est. -2.45b (prior -2.49b, revised -2.19b)

-9 :45 AM: Markit US Service PMI, Sep F, est. 51.9 (prior 51.9)

Markit US Composite PMI, Sep F, (prior 52.0)

-10:00 AM: ISM Non-Manufacturing Composite, Sep, est. 53.0 (prior 51.4)

Factory Orders, Aug, est. -0.2% (prior 1.9%)

Factory Orders Ex Trans, Aug,  (prior 0.2%)

Durable Goods Orders, Aug F, est. 0.0% (prior 0.0%)

Durables Ex Transportation, Aug F, (prior -0.4%)

Cap Goods Orders Nondef Ex Air, Aug F, (prior 0.6%)

Cap Goods Ship Nondef Ex Air, Aug F,  (prior -0.4%)

Canadian Economic Data

-There is no major economic data 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