Comments

Market Update

US tsys moving lower after stronger Durable Goods after quiet o/n session and before Yellen speech at Jackson Hole. Light volume in TY futures (~252K), tsys lagging the decline in core Euro bonds despite weak German IFO confidence, the 10Y German bund 2bos higher @ -0.07%. GOCs weaker after US durable goods came in stronger than exp for July. Provis opening beter offered after closing wider yest 1-1.5bps. Manulife printed a 5Y dep note yest @ 125 (25 over Bank dn) which was well oversubscribed, opening 120 bid.

News headlines                                                                                                                                                                                                       

• European Stocks Retreat as Dollar Rally Fades Before Yellen (Bloomberg)  European stocks fell for the first time this week amid concern over the outlook for economic growth while a dollar rally ran out of steam before signals on the likely path of U.S. interest rates. Equity markets retreated in Europe as an unexpected drop in German business sentiment signaled companies remained cautious after Britain’s decision to quit the European Union.
• Oil prices fall as hopes of production freeze fade (Reuters) Oil prices slipped on Thursday as the market focused on oversupply and fading hopes of a production freeze. Global crude oil benchmark Brent LCOc1 was down 15 cents at $48.90 a barrel by 1043 GMT, having closed down 1.8 percent on Wednesday. U.S. light crude oil CLc1 was down 5 cents at $46.72 a barrel, after dropping 2.8 percent on Wednesday.
• German Companies Get Delayed Brexit Shock as Confidence Plunges (Bloomberg) German business sentiment unexpectedly declined the most in more than four years in August in a sign that companies are waking up to the consequences Britain’s decision to quit the European Union will have on the economy. The drop in the key Ifo business climate index enforces the concern company executives from Siemens AG to Thyssenkrupp AG have raised in the previous weeks: Political uncertainty related to Brexit and a range of other crises in the region threaten to damp so-far solid growth in Europe’s largest economy. Business sentiment in France, whose recovery ground to a halt in the second quarter, also slipped this month.
• Central bankers eye public spending to plug $1 trillion investment gap (Reuters) While markets wait for Janet Yellen’s latest message about the direction of monetary policy, the Federal Reserve chief and her colleagues already have one for politicians: the U.S. economy needs more public spending to shift into higher gear. In the past few weeks, Yellen and three of the Fed’s other four Washington-based governors have called in speeches and Congressional hearings for government infrastructure spending and other efforts to counter weak growth, sagging productivity improvements, and lagging business investment.
• Bond Traders Are Desperate for Direction From Yellen in Jackson Hole (Reuters) The world’s biggest bond traders are getting fed up with Fedspeak. Weeks of conflicting economic reports have whipsawed investors seeking to handicap the path of interest rates, and money managers overseeing about $6 trillion, including Pacific Investment Management Co. and Vanguard Group Inc., say policy makers aren’t making their task any easier.
• CIBC sees big jump in profit after gain on sale of U.S. money manager (Financial Post) Canadian Imperial Bank of Commerce said its fiscal third-quarter profit rose 47 per cent, boosted by a $383 million gain from selling its minority stake in U.S. money manager American Century Investments. Net income for the period ended July 31 rose to $1.44 billion, or $3.61 a share, from $978 million, or $2.42, a year earlier, the Toronto-based bank said Thursday in a statement. Profit excluding some items was $2.67 a share, beating the $2.34 average estimate of 14 analysts surveyed by Bloomberg.
• TD Bank profit grows four per cent to $2.36 billion on strong U.S. bank earnings (Financial Post) TD Bank is reporting a third-quarter profit of $2.36 billion, up four per cent from a year ago on strong earnings from its U.S. retail banking operations. Last year, the bank earned $2.27 billion during the three months ended July 31. On a per share basis, TD earned $1.24 during the third quarter, compared with $1.19 during the same period last year.

Overnight markets

• Overview: US 10yr note futures are down -0.1064% at 132-3, S&P 500 futures are down -0.24% at 2169.75, Crude oil futures are down -0.34% at $46.61, Gold futures are down -0.55% at $1322.4, DXY is down -0.13% at 94.661.

US Economic Data

• 8:30 AM:  Initial Jobless Claims, August 20^th, 261k, est. 265k (prior 262k)
  •     Continuing Claims, August 13^th, 2145k, est. 2155k (prior 2175k)
  •     Durable Goods Orders, July P, 4.4%, est. 3.4% (prior -3.9%, revised -4.2%)
  •     Durable Ex Transportation, July P, 1.5%, est. 0.4% (prior -0.4%, revised -0.3%)
• 9:45 AM: Markit US Services PMI, August P, est. 51.8 (prior 51.4)
  •     Markit US Composite PMI, August P, (prior 43.6)
• 11:00 AM: Kansas City Fed. Manufacturing Activity Index, August, est. -2 (prior -6)

Canadian Economic Data

• There is no major economic data release 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

• US tsys either side of unch on low volume session (204K TY1) with an upward bias since NA trading, the US 10Y 1.545% (-0.5bps). WTI trading lower after API data showed inventories up 4.46mln bbls. Asian stocks mixed with the HS index closing lower but the Nikkei up 0.60%, European stocks higher led by financials – the Euro stoxx bank index up ~5.0% to the highest level since Brexit. The UST auctions $34bln in 5Y notes this aft , at 1.13% yields are ~5bps lower than at last month’s auction which saw mediocre demand based on indirect demand. In Canada, GOCs slightly higher, provis unch – 2 deals yest for $1.3bln – Ont 26s @86.5 & Newf 26s @ 140 (53 over ont). Alberta budget update – deficit for this yr will be $500mln larger than exp due to wildfires. The BOC auctions $3.3bln in reopened Sep 19s. At 0.56% yields are ~10 bps off the July lows and with the roll to current 2s 0.5bps the 3Y doesn’t look too compelling. 

News headlines                                                                                                    

• Global stocks ease, dollar holds ground as U.S. rate bets abound (Reuters) Stocks slipped on Wednesday while the dollar continued to claw back last week’s losses as investors grappled with the prospect of a U.S. interest rate increase in the months ahead coming amid continued uncertainty about the strength of the global economy.
• Developing-Nation Assets Drop on Fed Rates Bets as Oil Declines (Bloomberg) Emerging-market assets fell with commodities as expectations for a U.S. interest-rate increase grew before a speech this week by Federal Reserve Chair Janet Yellen. The MSCI gauge of developing nations’ shares dropped the most in three weeks after Fed funds futures ended Tuesday showing a 54 percent chance of a U.S. interest-rate increase by December. The dollar rose against the euro and the Swiss franc. South Korea’s won weakened after North Korea conducted a missile test, while South Africa’s currency and bonds declined amid speculation the finance minister will be replaced. Signs of rising stockpiles sent oil and copper lower.
• German Trade Bolsters Economic Growth as Investment Declines (Bloomberg) Trade was the main driver of German economic growth in the second quarter as domestic demand suffered from a slump in investment. Trade was the main driver of German economic growth in the second quarter as domestic demand suffered from a slump in investment.
• Royal Bank of Canada hikes dividend as $2.7 billion profit beats expectations (Financial Post) Royal Bank of Canada on Wednesday reported third-quarter results which beat market expectations, with funds set aside to cover bad loans falling thanks to higher oil prices. Like other Canadian lenders, RBC had seen a rise in bad loans to oil and gas companies due to declining energy prices, with crude prices falling to a 13-year low of $25 a barrel in January. However, average oil prices recovered by around 30 per cent during the latest quarter, providing relief to energy companies that had been struggling to repay debt.
• Oil falls on surprise build in U.S. crude stocks (Reuters) Oil prices fell on Wednesday on an unexpected increase in U.S. crude stocks that revived worries about the supply glut that has capped prices for the past two years. Oil prices fell on Wednesday on an unexpected increase in U.S. crude stocks that revived worries about the supply glut that has capped prices for the past two years.
• First Kenyan Oil Output Due by March 2017; Exports to Follow (Bloomberg) Tullow Oil Plc will put Kenya on the map of oil producers by the first quarter of 2017 and drill eight additional exploration wells in the African nation’s North Lokichar region, President Uhuru Kenyatta said. Exports will commence three months later, with the crude being transported by road to the Indian Ocean port city of Mombasa, Kenyatta said in an e-mailed statement after he met with Tullow’s chief operating officer, Paul McDade. Kenya’s recoverable resources are estimated at 750 million barrels.
• S. business borrowing for equipment falls 17 percent in July – ELFA (Reuters) Borrowings by U.S. companies for capital investment in July fell 17 percent from a year earlier, the Equipment Leasing and Finance Association (ELFA) said. Companies signed up for $7 billion in new loans, leases and lines of credit last month, the Washington-based trade group said on Monday. In the first seven months of 2016, total new borrowings declined 8 percent from a year earlier, said ELFA, which reports economic activity for the $1 trillion U.S. equipment finance industry.

Overnight markets

• Overview: US 10yr note futures are up 0.0236% at 132-8, S&P 500 futures are up 0.03% at 2186, Crude oil futures are down -1.62% at $47.32, Gold futures are down -0.65% at $1337.4, DXY is up 0.22% at 94.751.

US Economic Data

• 9:00 FHFA House Price Index, m/m, June, est. 0.3% (prior 0.5%)
• 10:00 AM: Existing Home Sales, July, est. 5.51m, (prior 5.57m)
  •      Existing Home Sales, m/m, July, est. -1.1% (prior 1.1%)

Canadian Economic Data

• There is no major economic data release 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

US tsys yields ~1bp higher across the curve, except the long end which is unch, the US 10Y 1.55% (+1bp). Tsys rebounding after earlier losses in Europe as stock futures decline. European stocks holding on to ~1.0% gains, core Euro bonds lower – the Eurozone PMI rose to pre Brexit levels in August suggested continued growth in the area. Barclays month end extension for the Tsy index is a fairly large 0.13yrs which could add to flattening pressure going into month end. The US auctions $26bln in 2Y notes this afternoon with the 2Y @0.75% close to the top of its two-month range. The auction could require more of a concession given its proximity to Fed Yellen’s speech on Friday and recent hawkish Fedspeak from Fischer, Williams and Dudley. The mkt is still only ascribing 50% odds of a rate hike before year end. In Canada, GOCs are slightly higher in line with tsys , adding to yesterday’s bull flattening rally – the 10Y closing in once again on 1.0% resistance. Provi spds unch to start -Ont 26 86/85.5, Ont 48 98.5/97.5 – QC & NF rumoured supply candidates today. RioCan reit in the market with a 4Y deal @ 162 (+/- 2bps).

News headlines    

• US tsys yields ~1bp higher across the curve, except the long end which is unch, the US 10Y 1.55% (+1bp). Tsys rebounding after earlier losses in Europe as stock futures decline. European stocks holding on to ~1.0% gains, core Euro bonds lower – the Eurozone PMI rose to pre Brexit levels in August suggested continued growth in the area. Barclays month end extension for the Tsy index is a fairly large 0.13yrs which could add to flattening pressure going into month end. The US auctions $26bln in 2Y notes this afternoon with the 2Y @0.75% close to the top of its two-month range. The auction could require more of a concession given its proximity to Fed Yellen’s speech on Friday and recent hawkish Fedspeak from Fischer, Williams and Dudley. The mkt is still only ascribing 50% odds of a rate hike before year end. In Canada, GOCs are slightly higher in line with tsys , adding to yesterday’s bull flattening rally – the 10Y closing in once again on 1.0% resistance. Provi spds unch to start -Ont 26 86/85.5, Ont 48 98.5/97.5 – QC & NF rumoured supply candidates today. RioCan reit in the market with a 4Y deal @ 162 (+/- 2bps).

News headlines                                                                                           

• Dollar Drops on Rate Outlook as European Stocks Rise, Oil Falls (Bloomberg) The dollar halted a two-day advance while emerging markets rebounded as investors reassessed prospects for higher U.S. interest rates. European stocks rose with U.S. equity-index futures, while oil extended its retreat from a seven-week high.
• IFC signs finance deal with Eurobank, eyes more with Greek banks (Reuters) The International Finance Corporation (IFC), a unit of the World Bank, signed a 100 million euro ($113.3 million) trade finance deal with Greek lender Eurobank (EURBr.AT) on Tuesday in a bid to provide much needed credit. The IFC, founded in 1956, last year invested about 300 million euros in Greece’s four big banks including Eurobank, taking part in their recapitalization and becoming a shareholder in all four lenders.
• Bank of Japan’s rush into stocks raises fears of market distortions (Reuters) The Bank of Japan’s near doubling of its purchases of Tokyo shares is causing investors to worry the central bank will dominate financial markets, which could lead to price distortions as it continues to grease the economy. The BOJ’s buying spree will make it harder for investors to sift good companies from bad, and raises a host of other problems including misallocating capital, making equities trading more speculative and reducing incentives for companies to meet shareholder needs, analysts say.
• Merkel Says Brexit Is U.K.’s Loss While Pledging EU Results (Bloomberg) German Chancellor Angela Merkel said the European Union needs to show it can prosper without the U.K. as she and the leaders of France and Italy sought to chart a way forward for Europe. “We respect Britain’s decision but naturally also want to make it clear that the other 27 are working for a prosperous, safe Europe,” said Merkel, standing alongside President Francois Hollande and Prime Minister Matteo Renzi on an Italian aircraft carrier to show resolve in mastering the continent’s crises. “We need results,” she said.
• Turkey cuts rates for sixth straight month amid ratings worries (Reuters) Turkey’s central bank cut borrowing costs for the sixth straight month on Tuesday, lowering its overnight lending rate by 25 basis points despite high inflation and worries about possible credit rating downgrades. As expected, the bank cut the highest of the multiple interest rates it uses to set policy to 8.5 percent. It left its benchmark one-week repo rate unchanged at 7.5 percent. Fifteen of 17 economists in a Reuters survey forecast a 25 basis point cut in the overnight rate, while two expected a cut of 50 basis points.
• Best Buy reports surprise rise comparable-stores sales (Reuters) Best Buy Co Inc (BBY.N) reported a surprise rise in quarterly comparable stores sales, helped by strong demand for appliances and consumer electronics. The company’s shares jumped more than 15 percent to $37.88 in premarket trading on Tuesday. The largest U.S. consumer electronics retailer also forecast revenue of $8.8 billion-$8.9 billion and a profit of 43-47 cents per share for the third quarter.
• BMO beats expectations as profit climbs to $1.25 billion, but more money set aside for bad loans (Financial Post) The Bank of Montreal saw its third-quarter profit grow four per cent to $1.25 billion even as it set aside more money for bad loans. Last year, BMO reported net income of $1.19 billion during the third quarter. On a per share basis, the earnings amounted to $1.86, compared with $1.80 per share during the same period last year.

Overnight markets                                                                     

• Overview: US 10yr note futures are down -0.0472% at 132-7, S&P 500 futures are up 0.26% at 2187.25, Crude oil futures are down -0.91% at $46.98, Gold futures are up 0.37% at $1348.4, DXY is down -0.19% at 94.337.

US Economic Data

• 9:45 AM : Markit US Manufacturing PMI, Aug P, est. 52.6 (prior 52.9)
• 10:00 AM: Richmond Manufacturing Index, Aug, est. 6 (prior 10)
  •       New Home Sales, July, est. 580k (prior 592k)
  •       New Home Sales, m/m, July, est. -2.0% (prior 3.5%)

Canadian Economic Data

• There is no major economic data release 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