Comments

Market Update

• US tsys slightly higher, curve flatter, US 10Y 1.575 (-0.5bps). Tsys lagging the core Euro bonds which are seeing renewed bull flattening with the 10Y bund yield -4bps @ -0.074%. Hawkish comments from Fed Fischer weighting on shorter term yields – Fischer noted the US economy is close to the Fed’s goal of max employment and price stability. Lower crude also supporting l.t. bonds – the Oct Brent contract breaking below $50 down ~3.0%.  Stock futures lower, Euro stoxx down 0.50%, the USD index higher yet close to unch after rising overnite, bullish momentum in the JPY despite BOK Kuroda comments that the central bank could lower interest rates further. GOCs moving higher with tsys, curve flatter led by the 10Y. Provi spds opening better bid after closing the week 1-2bps tighter led by the long end. Supply in the near term unlikely after a slew in issuance last week, thou conditions are favorable for issuance given the flattening of the GOC & provi credit curves

 News headlines                                                                                                     

• Dollar gains, U.S. yields rise as investors await Fed hike signal (Reuters) The dollar strengthened and U.S. Treasury yields hit a two-week high on Monday on expectations the Federal Reserve will give a signal this week that it is gearing up to raise interest rates. An upbeat assessment of the U.S. economy’s strength from Fed Vice Chairman Stanley Fischer on Sunday was seen raising the prospect of Fed chair Janet Yellen flagging up a rate rise at a meeting with the world’s central bankers on Friday.
• Oil falls as China fuel exports jump, U.S. rigs rise (Reuters) Oil prices fell nearly 3 percent on Monday as China ramped up exports of refined products, U.S. oil producers added rigs for an eighth consecutive week, and prospects emerged for increased exports from Iraq and Nigeria. Brent crude futures LCOc1 were trading at $49.39 per barrel at 1028 GMT, down $1.49 from their last close.
• Fischer Signals 2016 Rate Hike With Economy Nearing Fed Goals (Bloomberg) Federal Reserve Vice Chairman Stanley Fischer signaled that a 2016 rate hike is still under consideration, saying the U.S. economy is already close to meeting the central bank’s goals and that growth will gain steam. “We are close to our targets,” Fischer said in a speech at the Aspen Institute in Aspen, Colorado on Sunday. “Looking ahead, I expect GDP growth to pick up in coming quarters, as investment recovers from a surprisingly weak patch and the drag from past dollar appreciation diminishes,” he added, without giving explicit views on his rate outlook.
• Show of European unity: Merkel, Hollande, Renzi meet to discuss gameplan (Reuters) The leaders of Germany, France and Italy will meet on Monday to discuss how to keep the European project together in the second set of talks between the premiers of the euro zone’s three largest economies since Britain’s shock vote to leave the bloc. Italian Prime Minister Matteo Renzi hosts German Chancellor Angela Merkel and French President Francois Hollande on an island off the coast of Naples ahead of September’s EU summit called to discuss reverberations from the Brexit vote.
• Pfizer to buy Medivation in $14 billion deal (Reuters) Pfizer Inc (PFE.N) said on Monday it would buy U.S. cancer drug company Medivation Inc (MDVN.O) in a deal valued at about $14 billion to boost its oncology portfolio. Pfizer will offer Medivation shareholders $81.50 per share in cash, a substantial premium to Sanofi SA’s (SASY.PA) first offer of $52.50 made in April that forced Medivation to put itself up for sale.
• Alimentation Couche-Tard Inc to buy Texas-based convenience store chain CST Brands Inc for $4.4 billion (Financial Post) Alimentation Couche-Tard Inc. has announced a US$4.4-billion friendly deal to buy Texas-based CST Brands Inc. The announcement comes after news of a possible deal between the two convenience store companies became public last week. Quebec-based Couche-Tard says it will pay US$48.53 cash per share of CST Brands. The total value of the deal includes assumed debt that Couche-Tard will assume. CST employs 14,000 people at more than 2,000 locations in the southwestern United States.
• Valeant shakeup continues, hires Zoetis’s Paul Herendeen as CFO (TheGlobeAndMail)  The shakeup in the executive ranks at Valeant Pharmaceuticals International Inc. continues with the appointment of a new chief financial officer. The Laval, Que.-based drug giant said on Monday it has hired Paul Herendeen as executive vice-president, finance. Mr. Herendeen is leaving animal health company Zoetis Inc., where he had been CFO for the past two years. Current Valeant CFO Robert Rosiello is stepping down immediately but will stay on to oversee corporate development and strategy at embattled Valeant.

Overnight markets

• Overview: US 10yr note futures are up 0.1184% at 132-4, S&P 500 futures are down -0.19% at 2177.5, Crude oil futures are down -2.6% at $47.26, Gold futures are down -0.36% at $1341.4, DXY is up 0.16% at 94.662.

US Economic Data

• 8:30 AM: Chicago Fed Nat Activity Index, July, 0.27, est. 0.20 (prior 0.16, revised 0.05)

Canadian Economic Data

• 8:30 AM: Wholesale Trade Sales, m/m, June, 0.7%,  est. 0.1% (prior 1.8%, 1.9%)

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 opening lower, US 10Y 1.56 (+2bps), tsys under pressure for most of the overnite session after rising late yest aft. Fed Williams said Sep FOMC meeting is in play and that the US economy is strong enough to warrant rate hikes sooner than later to prevent overheating. Core Euro bonds lower led by UK gilts with the gilt curve ~3bps steeper and the UK 10Y 0.59% (+4bps). German bunds lower, yields ~2bps higher across the curve despite lower European stocks and lower oil (WTI below $48). GOCs lower, curve ~2bps steeper lagging the decline in tsys after weak Cdn data:  June retail sales -0.1% vs 0.5% exp  & CPI -0.2% vs 0.0% exp. Provis opening better bid , Ont 26s trading down @ 85.5 after closing at 87/86 yest. Supply unlikely thou Newf 10s & Mani longs rumoured.

 News headlines                                                                                 

• European shares, oil ease as markets return to Fed-watching (Reuters) European shares were poised to post their biggest weekly loss in two months on Friday while crude oil snapped its winning streak after a weaker dollar and hopes of production cuts had lifted prices to eight-week highs. With the corporate earnings season in the United States and Europe largely out of the way, the focus is back on the U.S. Federal Reserve and whether it decides to raise interest rates.
• Early Brexit relief not much comfort for Bank of England (Reuters) The Bank of England will draw some comfort from signs that Britons took the initial shock of June’s Brexit vote in their stride, but will see little to lessen the concern that prompted its huge stimulus announcement this month. The first official data covering the post-referendum period, published this week, has shown no immediate big hit to Britain’s economy as retail sales surged in July and claims for unemployment benefits fell.
• Oil rises, enters bull market territory (GlobeandMail) Oil prices rose on Thursday for a sixth straight day, with Brent crude rising above $50 for the first time in six weeks as the world’s biggest producers prepared to discuss a possible freeze in production levels. Brent ended the session up 2.09 per cent at $50.89. The session high of $51.05 was its highest since June 23.
• OPEC Freeze Wouldn’t Be So Potent as Gulf Rivals Pump More (Bloomberg) Even if OPEC strikes a deal with Russia next month in Algiers to freeze oil production, success will mean a lot less than when they tried and failed four months ago. Oil has rallied more than 10 percent since the Organization of Petroleum Exporting Countries said that it will hold an informal meeting in the Algerian capital, fanning speculation the group could complete a supply agreement with rival producers that sputtered in April. Iran may now drop its refusal to join a freeze after restoring most of the crude output curbed by sanctions, a development analysts say makes a deal more likely, but also less worthwhile.
• Ontario Teachers’ Pension Plan seeking buyers for minority stake in $4-billion Vancouver real estate portfolio: sources (FinancialPost) The Ontario Teachers’ Pension Plan is seeking buyers for a minority stake in its $4 billion real-estate portfolio in Vancouver, including office towers and shopping malls, according to people familiar with the matter. Cadillac Fairview, the real-estate unit of Canada’s third-biggest pension fund, is looking to raise about $2 billion from the sale, according to the people, who asked not to be identified. Cadillac Fairview has hired CBRE Group Inc. and Royal Bank of Canada for the sale, the people said. Spokespeople for Cadillac Fairview, CBRE, and RBC didn’t immediately respond to requests for comment or declined to comment.
• Pro-Brexit Economists Sense Vindication as U.K. Shows Resilience (Bloomberg) Pro-Brexit economists smell vindication, not fear. With consumers on their biggest summer spending spree in 14 years after Britain’s vote to quit the European Union, “Leave” backers Patrick Minford and Ruth Lea see reasons to be cheerful. For them, bumper retail sales figures this week and a report showing the labor market remained resilient provide initial evidence that the economy can defy gloomy pre-vote predictions.
• Dollar edges up, but on track for weekly loss (Bloomberg) The dollar inched higher on Friday but was set for a more than 1 percent loss against all its major peers on the week, weighed down by investors’ lack of belief in the chances of a rise in U.S. interest rates this year. All of the major currencies were trading in tight ranges, with the exception of the Australian dollar, pushed 0.9 percent lower by a cut by Moody’s in its outlook for Australian bank ratings.

Overnight markets

• Overview: US 10yr note futures are down -0.2007% at 132-4, S&P 500 futures are down -0.25% at 2178, Crude oil futures are down -0.44% at $48.01, Gold futures are down -1.05% at $1343, DXY is up 0.38% at 94.518.

US Economic Data

• There is no major economic data release for today

Canadian Economic Data

•   8:30 AM: Retail Sales, m/m, June, -0.1%, est. 0.5% (prior 0.2%)
  Retail Sales Ex Auto, m/m, June, -0.8%, est. 0.3% (prior 0.9%, revised 0.8%)
  CPI, y/y, July, 1.3%, est. 1.4% (prior 1.5%)
  CPI Core, m/m, July, 0.0%, est 0.0% (prior 0.0%)
  CPI Core, y/y, July, 2.1%, est. 2.1% (prior 2.1%)

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

• US tsys opening slightly higher, US 10Y 1.55%.  Tsys rose in Asia on the back of dovish FOMC & higher JPY. European stocks moving lower in NA trade giving up earlier gains while S&P futures are lower as well –  Walmart’s Q2 earnings beat having little impact. Initial claims -4k  to 262k in week of August 13th  vs 265k exp. GOCs lower in line with tsys, curve steeper led by the belly. Provis opening unch after closing 0.5bps wider yest – the new CMB 10Y was well received @ 57bps closing 56.5/56.

 News headlines                                                                                 

• World stocks rise, dollar weakens on divided Fed (Reuters) World stocks rose and the dollar sank to a seven-week low on Thursday after minutes of the U.S. Federal Reserve’s latest meeting showed policymakers were divided over whether to raise interest rates soon. Recent comments from Fed officials suggested a hike in the world’s largest economy could be on the cards as soon as next month, but signs of restraint within the rate-setting committee brought relief to markets, sending global bond yields lower.
• Oil steady near six-week highs on talk of supply freeze (Reuters) Brent crude oil traded above $50 a barrel for the first time in six weeks on Thursday as the world’s biggest producers prepared to discuss a possible freeze in output levels. Brent hit a high of $50.05 a barrel, up 20 cents on the day, before easing back to around $49.75, down 10 cents, by 1000 GMT. U.S. light crude oil was up 20 cents at $46.99.
• Japan’s July Exports Drop 14 Percent in Biggest Fall Since 2009 (Bloomberg) Japan’s exports declined the most since 2009, with shipments down for a 10th consecutive month. The continued drop highlights the difficulty of kick-starting growth and pulling Japan’s economy out of the doldrums.
• Euro zone return to inflation confirmed as food prices surge (Reuters) A modest uptick in euro zone inflation in July was confirmed by data on Friday which showed food prices surging over the year, although overall price indices still fell in 12 of the 19 member states. Euro zone prices rose 0.2 percent year-on-year, Eurostat said, confirming its initial estimate of two weeks ago. Month-on-month, prices fell 0.6 percent from June.
• Brexit Means Little to British Consumers When the Sun Is Shining (Bloomberg) The U.K. consumer is looking strong for now, shrugging off any Brexit anxiety to enjoy the biggest summer splurge in 14 years. The unexpected 1.4 percent increase in July retail sales reported on Thursday was the best for that month since 2002. It tallies with an industry survey this month showing that warmer weather boosted purchases of summer clothing, food and barbecues. Kingfisher Plc, Europe’s largest home-improvement retailer, said that while the vote to leave the European Union created economic uncertainty, there’s “no clear evidence of an impact on demand.”
• Aussie Strengthens After July Employment Growth Beats Forecasts (Bloomberg) Australia’s dollar rose after data showed employment growth beat analysts’ forecasts last month. The Aussie climbed 0.3 percent from Wednesday to 76.77 U.S. cents as at 11.32 a.m. in Sydney.
• Delinquency rates climb in Alberta, Saskatchewan (TheGlobeandMail) Delinquency rates in Alberta and Saskatchewan climbed higher in the second quarter due to the fallout from the drop in the price of oil. Equifax Canada said Thursday the delinquency rate for Alberta stood at 1.4 per cent, up 40.3 per cent compared with a year ago. The delinquency rate in Saskatchewan climbed to 1.2 per cent, a gain of 22.7 per cent.

Overnight markets

• Overview: US 10yr note futures are up 0.1064% at 132-8, S&P 500 futures are down -0.09% at 2177.75, Crude oil futures are up 0.75% at $47.14, Gold futures are up 0.52% at $1355.8, DXY is down -0.23% at 94.504.

US Economic Data

• 8:30 AM: Initial Jobless Claims, August 13^th, 262k, est. 265k, (prior 266k)
  •      Continuing Claims, August 6^th, 2175k, 2142k (prior 2155k)
  •      Philadelphia Fed Business Index, August, 2.0, est. 2.0 (prior -2.9)
• 10:00 AM: Leading Indicator, July, est. 0.3 (prior 0.3%)

Canadian Economic Data

• 8:30 AM: Int’l Securities Transactions, June, (prior 14.73b)

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