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Market Update

– Tsys trading slightly weaker, curve flatter, US 10Y 1.62%, narrow overnite range in TY futures. European stocks higher, reserve Bank of Australia kept rates unch, big decline in Aussie bonds pressured tsys, Aussie curve  ~6bps steeper. Order book said to be quite strong for Italy’s first 50yr bond – over E18bln for E5bln deal.  Crude lower slightly lower48.34, gold below $13,00 for the first time since the Brexit vote in June. Cleveland Fed Mester said yest aft she favored Nov rate hike. GOCs unwinding early gains as German bunds/ UK gilts succumb to selling pressure. The GBP at new lows after May refused to grant any special favors to British financial services sector in the leadup to a ‘hard Brexit’.  Provies opening unch with issuance exp after nothing yest, Alberta 5Y , Ontario in 10s & longs. Ontario 2016 fiscal update – deficits will be smaller than exp this FY – $5bln vs $5.7bln projected in Feb., thou net debt is $10.7bln higher.

News headlines                                                                                                                                                                                       

–U.S. Index Futures Little Changed as Investors Assess Hike Odds (Bloomberg) U.S. stock-index futures were little changed as investors assessed the odds of the Federal Reserve judging the world’s biggest economy strong enough to withstand an interest rate hike this year, while concerns over European banks eased.

–Oil eases as Iran, Libya output rises hit OPEC deal momentum (Reuters) Oil prices eased on Tuesday on news that Iran and Libya have continued to increase production, overshadowing an OPEC agreement struck last week to freeze output levels in a bid to stem a two-year price rout.

–Pound Drops to Lowest Since 1985 as Angst Builds Over Brexit (Bloomberg) The pound tumbled to its lowest level in three decades amid mounting concern the U.K. is heading for a so-called hard Brexit that would restrict access to the European Union’s single market. Sterling exceeded its lows versus the dollar set in the wake of the June 23 referendum and touched the weakest in three years against the euro. The slide extended as Prime Minister Theresa May was said to take the view that financial services would get no special favors in EU exit talks. The pound has fallen against all 16 of its major peers since the premier’s weekend announcement that she’ll trigger the formal process for quitting by March.

–Low rates are here to stay, ECB’s Praet tells bankers (Reuters) The European Central Bank is set to keep its interest rates low until it gets inflation back to its target, the ECB’s chief economist said on Tuesday, arguing it was not up to the institution to shore up meager bank profits.

–China September data seen tipping mild pickup in economy (Reuters) A flurry of data from China in coming weeks is expected to point to modest improvement in the economy in the third quarter as a government infrastructure spree and a housing boom boosts demand from steel and glass to furniture and appliances. Exports are expected to remain, weak, however, while fixed asset investment is likely to hover near 17-year lows, leaving the economy imbalanced and highly reliant on a rebound in heavy industry and government spending for growth.

–Federal government closes tax loophole used by foreign home buyers, hikes mortgage scrutiny (Financial Post) The federal government is taking aim at slowing Canada’s overheated housing market with new measures, including closing a tax loophole used by foreign buyers and stress testing more domestic mortgages. Finance Minister Bill Morneau announced the changes during a conference Monday, describing them as a way to ensure that the country’s housing market remains stable and affordable for Canadian buyers.

–U.S. apartment vacancy rate stays flat in third quarter (Reuters) U.S. apartment vacancy rate was unchanged at 4.4 percent in the third quarter from the second, while rent growth decelerated in a period that generally sees the strongest increase, real estate research firm Reis Inc (REIS.O) said on Monday. Asking and effective rents both expanded 0.9 percent during the quarter, compared with a 1.1 percent growth rate in the second. This was the third consecutive quarter of decelerating year-over-year rent growth.

–The Reserve Bank of India unexpectedly lowered its repo rate by 25 basis points to 6.25% (Reuters) The latest cut extends an easing cycle that began in January 2015 under Patel’s predecessor Raghuram Rajan and reduces the repo policy rate to its lowest since November 2010. The Indian rupee is weaker by 0.1% at 66.5425 per dollar.

Overnight markets                                                                     

– Overview: US 10yr note futures are down -0.0835% at 130-27, S&P 500 futures are up 0.01% at 2153.5, Crude oil futures are down -0.31% at $48.66, Gold futures are down -1.32% at $1295.4, DXY is up 0.52% at 96.192.

US Economic Data

-9:45 AM:  ISM New York, Sep, (prior 47.5)

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

Market Update

– German government bonds are trading modestly lower in NY open Monday, with the 10-year part of the yield curve underperforming, weighed by better than expected Spain, Italy and UK manufacturing PMI. However, volumes were very light as German celebrates Unification Day holiday. Quiet start for Asian hours as China’s week-long National Day holiday began Saturday, Oct. 1 ends Friday, Oct. 7 w/financial markets closed till Monday, Oct. 10. South Korea, Malaysia and Australia out for day as well. Brent crude oil, the international benchmark, is higher by 1.0% at $50.71 a barrel and is on track for its first close above $50 since August 19. West Texas Intermediate crude oil is up 1.0% at $48.72 a barrel. Deutsche Bank CEO John Cryan will be in Washington, DC, for this week’s annual International Monetary Fund meeting, and Frankfurter Allgemeine Zeitung reports that other bank executives are expected to join him to try to hammer out a settlement with the US Department of Justice. Prime Minister Theresa May says the UK will trigger Article 50 before “the end of March next year,” formally beginning its two-year process to leave the European Union. The British pound is down 0.7% at 1.2880.

News headlines                                                                                                

–S&P 500 Futures Hold Steady After Stocks’ Best Quarter of 2016 (Bloomberg) U.S. stock-index futures were little changed, with investors awaiting economic data as concerns over the health of Deutsche Bank AG subsided. S&P 500 Index contracts expiring in December lost less than 0.1 percent to 2,160 at 7:29 a.m. in New York. The benchmark on Friday rose 0.8 percent as relief swept over equity markets after a report Deutsche Bank may pay less than half the Justice Department’s initial request to settle a probe related to bad mortgages. Dow Jones Industrial Average futures were unchanged at 18,219 today.

–Sterling sinks to three-year low on Brexit, European banks struggle again (Reuters) Sterling slumped to a three-year low against the euro on Monday as Britain set a March deadline to start divorce proceedings from the European Union, while worries over Deutsche Bank and Europe’s banking sector kept share prices in check. British stocks were the standout performers in Europe, lifted to an 18-month high by the pound’s broad and deep weakness and figures showing the fastest rise in UK manufacturing output in more than two years.

–Rising demand drove up September euro zone factory activity: PMI (Reuters) Manufacturing activity in the euro zone picked up last month as demand increased from both within and outside the currency bloc, driving factories to increase headcount, a survey showed on Monday. However, the upturn remained uneven and was centred on Germany and its neighbours. Growth was far weaker than earlier in the year in Spain, Italy and Ireland, while manufacturing in France continued to decline.

–Bank of England confirms will hold broader bank stress test in 2017 (Reuters) The Bank of England said on Monday it would hold a broader stress test of British banks’ resilience alongside its regular annual check-up of their financial health. The central bank will release the results of this year’s stress test at 0700 GMT on Nov. 30, alongside its half-yearly Financial Stability Report, and will go ahead with plans set out in 2015 to conduct a broader test as well in 2017.

–Canadian Investors Didn’t Get the Memo About Weak Global Growth (Bloomberg) The global economy may be stumbling along in one of its weakest patches ever but Canadian investors are wasting no time betting on a resurgence by piling into assets at home and abroad. Signs of optimism abound across every market in Canada, even with annual growth in the world’s 11th-largest economy barely topping 1 percent. Stock valuations in the S&P/TSX Composite Index have surged to the highest in 14 years; mergers reached a record in the third quarter, and investors are soaking up bonds sold by Canadian provinces and companies.

–Calgary office vacancy rates nearing 25 per cent, topping highs set in 1980s recession (Financial Post) Vacancy rates in downtown Calgary, hard hit by the prolonged oil slump and already at historic highs, could be heading to 25 per cent, including in some of the city’s most posh skyscrapers, new reports show. An office report from Barclay Street Real Estate pegs the city’s current downtown vacancy rate at 22.1 per cent, but notes that skyscrapers still under construction could push the rate to 25.6 per cent next year and 26.4 per cent in 2018.

– Janus to Merge With Henderson, Forming Asset Management Giant (NYTimes) Janus Capital Group and Henderson Group said on Monday that they would merge in an all-stock deal that would create an asset manager with greater global scale and about $320 billion of assets under management. The combined company — to be called Janus Henderson Global Investors — would be worth about $6 billion based on market capitalization.

Overnight markets   

– Overview: US 10yr note futures are down -0.0119% at 131-4, S&P 500 futures are down -0.15% at 2157.25, Crude oil futures are up 0.81% at $48.63, Gold futures are up 0.2% at $1319.8, DXY is up 0.06% at 95.525.

US Economic Data

-9:45 AM:  Markit US Manufacturing PMI, Sep F, est. 51.5 (prior 51.4)

-10:00 AM: Construction Spending, m/m, Aug, est. 0.3%(prior 0.0%)

ISM Manufacturing Sep, est. 50.3 (prior 49.4)

ISM Prices Paid, Sep, est. 53.5 (prior 53.0)

Canadian Economic Data

-9:30 AM: RBC Canadian Manufacturing Index, Sep, (prior 51.1)

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 open higher, US 10Y in risk off session as European stocks down 1.2% for a second day on more Deustche Bank concerns, Nikkei and HS down 1.0%. ING shares down 4.6% on reorg plans, DB off ~7.0%. The demand for US dollars has skyrocketed based on data from the ECB -$6.3bln in the latest week, the highest in four years.  Month end extensions for Sept 30th +0.08 yrs for the Barclays Tsy index vs 0.14yrs in Aug & 0.11 12 mnth avg. GOCs slightly higher, 1-2bps wider vs tsys after July GDP came in above exp 0.5% vs 0.3% – most of the improvement attributed to rebound in the oil & gas sector after the May wildfires. Longs seem bid in the pullback, 10s30 0.5bps flatter at 66.5. GOC 10s have outperformed to such an extent recently that longs look cheap, esp off the run 41s.  Provis opening 0.5bps wider on the bid, Ont 48s 97.5/97 after closing 1.5bps wider yest, thou all in yields still scraping the lows , Ont 10s ~1.82% . 

News headlines                                                                                                          

–Asia stocks slide as Deutsche sours mood, oil pulls back (Reuters) Asian stocks extended losses on Friday as worries about the health of Deutsche Bank weighed on financial shares and as oil prices inched back from near-one month highs on scepticism over OPEC’s new plan to curb output.

–Deutsche Bank Drops to Record as Some Clients Reduce Exposure (Bloomberg) Deutsche Bank AG Chief Executive Officer John Cryan rushed to shore up confidence in his beleaguered lender after concern some clients are reducing exposure to the company pushed shares to record lows.

–China September factory activity expands marginally as orders edge up-Caixin PMI (Reuters) China’s factory activity expanded in September as domestic and export orders picked up but the improvement was marginal and manufacturers continued to shed jobs, a private business survey showed on Friday.

–Japan’s Long and Winding Detour to Inflation (WSJ) The Bank of Japan may have shaken up its strategy to jump start inflation, but on the ground, there’s little sign change is coming. Headline consumer inflation remained negative in August, down 0.5% from the year earlier, making Japan the only major economy still so deeply in negative territory.

–Eurozone Inflation Picked Up in September (WSJ) The eurozone’s annual rate of inflation picked up to reach its highest level in almost two years during September, but a sustained rise toward the European Central Bank’s target remains in doubt as the number of people without jobs rose for the second time in three months.

–U.K. economy healthier than seen, GDP update shows (Market Watch) The U.K. economy performed better than previously thought in the period surrounding the nation’s referendum on membership of the European Union, according to a fresh batch of economic data Friday that will be welcomed by the country’s ruling Conservative Party ahead of its annual conference this weekend.

–Petronas weighs sale to exit $27 billion Canadian LNG project, sources say (Financial Post) Malaysian state oil firm Petroliam Nasional Bhd is considering selling its majority stake in a US$27 billion Canadian liquefied natural gas (LNG) plant, three people familiar with the matter said this week.

 Overnight markets

– Overview: US 10yr note futures are up 0.0594% at 131-20, S&P 500 futures are up 0.12% at 2151, Crude oil futures are up 0.15% at $47.9, Gold futures are up 0.35% at $1330.7, DXY is up 0.28% at 95.8.

US Economic Data

-8:30 AM: Personal Income, Aug, 0.2%, est. 0.2% (prior 0.4%)

Personal Spending, Aug, 0.0%, est. 0.1% (prior 0.3%)

PCE Core, m/m, Aug, 0.2%, est. 0.2% (prior 0.1%)

PCE Core, y/y, Aug, 1.7%, est. 1.7% (prior 1.6%)

-9:45 AM: Chicago PMI, Sep, est. 52.0 (prior 51.5)

-10:00 AM: University of Michigan Sentiment, Sep F, est. 90 (prior 89.8)

Canadian Economic Data

-8:30 AM: GDP, m/m, Jul, 0.5%, est. 0.3% (prior 0.60%)

GDP, y/y, Jul, 1.3%, est. 1.0% (prior 1.10%)

Industrial Product Price, m/m, Aug, -0.5%, est. -0.1% (prior 0.2%)

Raw Materials Price Index, m/m, Aug, -0.7%, est. -1.0% (prior -2.7%)

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