Commentaires

Market Update

• Treasuries seep lower amid revised higher 4.3% 2Q unit labor costs vs. prelim 2.0% gain; 10-year note is now at 1.607%. Pressed on latest claims, curve extends bear steepener move. Flow pretty orderly so far, still have several second tier data points today, ISM US PMI, waiting for headline August employ tomorrow. Also, Cleveland Fed Mester later today. China PMIs had mixed readings : govt PMI quite strong, Caixin PMI weaker. China’s Manufacturing PMI printed 50.4 in August, its highest reading since October 2014. Nonmanufacturing PMI, however, came in at 53.5, its weakest reading in three months.Initial unemployment claims +2k to 263k in Aug 27 week, as expected, following unrevised 261k in prev week. The 4-week moving average -1,000 to 263,000, as the July 30 week’s 267k level rolled out of the calculation. If there is no change in the headline number next week, the average will decline further.

News headlines                                                                                                 

• Stock futures rise ahead of economic data (Reuters)S. stock index futures were higher on Thursday ahead of a raft of economic data, including a crucial jobs report on Friday.
• Oil prices slide on U.S. inventory data, but analysts warn there is more to the story (Financial Post) Prices for international crude benchmarks slipped Wednesday on an unexpected rise in U.S. oil storage levels, but some analysts insist markets are still heading back toward balance as demand continues to rise. Benchmark crude West Texas Intermediate fell more than three per cent in Wednesday morning trading while weekly stockpiles of oil, liquified gases and refined products in the United States rose to 1.4 billion barrels, according to U.S. Energy Information Administration data. But some analysts say that rising U.S. storage should be considered alongside a sharp decline in so-called “spare capacity” elsewhere in the world, namely Saudi Arabia.
• Weak Pound Drives U.K. Factories Back From Brexit Shock (Bloomberg) U.K. factory activity reached a 10-month high in August as a weaker pound boosted exports, underscoring early evidence of British economic resilience after the Brexit vote. IHS Markit said its Purchasing Managers Index, which dropped below the key 50 level in July, jumped by a record to 53.3.
• Pound Bulls Encouraged by Signs of Post-Brexit Economic Optimism (Bloomberg) Pound bulls are getting solace as evidence mounts that the resilience of the British economy since the June Brexit vote may be sustained. Sterling rose for a second day against the dollar and climbed to its strongest level in four weeks versus the euro as a measure of U.K. manufacturing output unexpectedly expanded in August. Coming a day after GfK said its household confidence index last month regained almost half the ground lost in July, it’s the latest indication that the nation’s fortunes outside the European Union may not be as dire as some economists predicted, at least in the short term.
• China’s Factory Gauge Unexpectedly Rises to Highest Since 2014 (Bloomberg) China’s official factory gauge unexpectedly rose last month to the highest level in almost two years, suggesting the economy’s stabilization remains intact and that a weakening in July was flood-related and temporary.
• Canadian Western Bank profit falls, warns of more oil impact (Reuters) Canadian Western Bank CWB.TO reported a decline in earnings in the third-quarter on Thursday and said it expected the low price of oil to continue to impact its clients in the province of Alberta during the rest of 2016.

Overnight markets

• Overview: US 10yr note futures are down -0.2984% at 130-17, S&P 500 futures are down 0% at 2169.5, Crude oil futures are down -0.98% at $44.26, Gold futures are down -0.34% at $1307, DXY is up 0.07% at 96.091.

US Economic Data

• 8:30 AM: Nonfarm Productivity, 2Q F, -0.6%, est. -0.6% (prior 0.5%)
  • Unit Labor Costs, 2Q F, 4.3%, est. 2.1% (prior 2.0%)
  • Initial Jobless Claims, August 27^th, 263k, est. 265k (prior 261k)
  • Continuing Claims, August 20^th, 2159k, est. 2145k (prior 2145k)
• 9:45 AM: Markit US Manufacturing PMI, August F, est. 52.1 (prior 52.1)
• 10:00 AM: Construction Spending, m/m, July, est. 0.5% (prior -0.6%)
  • ISM Manufacturing, August, est. 52.0 (prior 52.6)
  • ISM Prices Paid, August est. 54.8 (prior 55.0)

Canadian Economic Data

• 9:30 AM: RBC Canadian Manufacturing Index, August, (prior 51.9)

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 rallying after ADP came in slightly above exp at 177k vs 175k with July revised to 194k from 179k, 10Y note 1.575 (+1bp). Tsys lower overnite in narrow range, rising off the lows in Europe. Fed Rosengren spoke of the risks in keeping rates too low, Fed Evans sounding more dovish saying low inflation anchoring long run rates. Core European bonds lower, short end outperforming after weak Eurozone flash HICP and after crude fell for the 3rd straight dayGOCs lower after June GDP surprised to the upside rising 0.6% vs 0.4% exp. Provis spds unch, Ont 26 87/86.5, Ont 48 99/98.5, QC/Ont 48 5/4.5 unch.

News headlines                                                                                                                                                                                                                             

• Treasuries Extend Drop in August on Fed Outlook as Dollar Gains (Bloomberg) Treasuries extended their steepest monthly loss since June 2015 and the dollar strengthened against the yen as hawkish rhetoric from Federal Reserve officials over the past two weeks steered financial markets. Ten-year Treasury yields headed for the biggest monthly jump in more than a year as traders almost doubled bets of a September Fed rate increase to 34 percent. The dollar advanced for a sixth day against the yen in the longest winning streak since March. Banks led a second day of gains in European stocks as Commerzbank AG rallied amid merger speculation. Oil trimmed its advance in the best month since April.
• Oil slips on dollar strength, still set for monthly gain (Reuters) Crude slid on Wednesday, pressured by a strong dollar and high stocks of oil, though prices remained on track for a monthly gain of more than 10 percent. Brent crude futures LCOc1 were trading at $47.94 per barrel at 1126 GMT, down 43 cents from the previous close, while U.S. West Texas Intermediate (WTI) crude futures CLc1 were down 33 cents at $46.02.
• Canada, China agree to deadline extension in canola export dispute, countries working on long-term solution (Financial Post) Prime Minister Justin Trudeau says existing dockage rules with China on canola exports have been extended beyond a Sept. 1 deadline as the two countries continue to negotiate a long-term solution. The two countries disagree on the level of “dockage” — foreign material such as weeds, other crops and detritus — that should be considered acceptable in Canada’s canola exports to China.
• Canada applies to join China-backed AIIB, latest U.S. ally to apply (Reuters) Canada will apply to join the China-backed Asian Infrastructure Investment Bank (AIIB), the bank’s president Jin Liqun said on Wednesday, making it the latest ally of the United States to join the new international development bank. The multilateral institution, seen as a rival to the Western-dominated World Bank and Asian Development Bank, was initially opposed by the United States but attracted many U.S. allies including Britain, Germany, Australia and South Korea as founding members.
• Euro zone inflation stable in August, against expectations of rise (Reuters) Euro zone inflation was stable in August, against expectations of a slight rise, as food, industrial good and services prices increased by less than in July, piling more pressure on the European Central Bank to act. Inflation in the 19 countries sharing the euro was 0.2 percent, the same rate as in July, EU’s statistics agency Eurostat said on Wednesday in its first estimate.
• Oil Discoveries at 70-Year Low Signal Supply Shortfall Ahead (Bloomberg) Explorers in 2015 discovered only about a tenth as much oil as they have annually on average since 1960. This year, they’ll probably find even less, spurring new fears about their ability to meet future demand.
• UK house prices rise, consumers regain some confidence after Brexit hit (Reuters) British house price rises picked up speed in August and households recovered some confidence which had plunged after June’s Brexit vote, according to surveys that added to signs of calm among consumers after the unexpected referendum result. However, the increase in house prices was largely driven by a shortage of homes on the market and the outlook depended on longer-term impact on the economy of the vote to leave the European Union, mortgage lender Nationwide said.

Overnight markets

• Overview: US 10yr note futures are down 0% at 130-30, S&P 500 futures are down -0.14% at 2172.25, Crude oil futures are down -1.04% at $45.87, Gold futures are down -0.34% at $1312, DXY is up 0.15% at 96.2.

US Economic Data

• 8:15 AM: ADP Employment Change, August, 177k , est. 175k (prior 179k, revised 194k)
• 9:45 AM: Chicago Purchasing Manager, August, est. 54.0 (prior 55.8)
• 10:00 AM: Pending Home Sales, m/m, July, est. 0.7% (prior 0.2%)

Canadian Economic Data

• 8:30 AM: GDP, m/m, June, 0.6%, est. 0.4% (prior -0.6%)
  GDP, y/y, June, 1.1%, est. 1.0% (prior 1.0%)
  Quartely GDP Annualized, 2Q, -1.6%, est. -1.5% (prior 2.4%, revised 2.5%)

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 lower, US 10Y 1.58 (+2bps), core Euro bonds higher led by 10Y UK gilts, German bunds also higher on lower CPI. Tsys mostly lower overnite on highe than avg volume, but cut losses after Fed Fischer admitted pace of rate increases depends on data.  GOCs lower, lagging the rebound in tsys after July IPPI cam ein above exp at +0.2% (-0.1% exp), yet the current account came in at $19.9bln, the widest since 2010 showing ongoing weakness in goods and services exports. Ontarios getting hit to start, Ont 46s @ 100.5 after widneing 0.5bps yest, longs underperforming. Supply expectations and lower cda yields weighing on spreads here.

News headlines                                                                                        

• Dollar Advances as Treasuries Drop on Rate Outlook; Stocks Rise (Bloomberg) The dollar strengthened and Treasuries fell as Federal Reserve Vice Chairman Stanley Fischer said the U.S. economy was close to full employment, reinforcing speculation that policy makers are moving toward raising interest rates. The Bloomberg Dollar Spot Index climbed to a three-week high as Fischer, who last week suggested that interest rates may rise as soon as September, said Tuesday in a Bloomberg Television interview that officials can choose the pace of rate increases based on economic data.
• Fed’s Fischer says U.S. job market ‘very close’ to full strength (Reuters) The U.S. job market is nearly at full strength and the pace of interest rate increases by the Federal Reserve will depend on how well the economy is doing, Fed Vice Chairman Stanley Fischer said on Tuesday. In an interview with Bloomberg TV, Fischer did not comment on the timing of the next Fed rate hike but said « we choose the pace on basis of data, » and that U.S. « employment is very close to full employment. »
• Japanese household spending, joblessness fall (Market Watch) Japanese household spending fell again in July despite continued improvement in the labor market, underlining the conflicting signs of progress in Prime Minister Shinzo Abe’s efforts to generate sustained growth. Spending fell 0.5% from a year earlier in July, down for the fifth month in a row and the 10th time in the past year, according to data released Tuesday by the internal affairs ministry. The figure is adjusted for price changes. Economists surveyed by The Wall Street Journal and the Nikkei expected a 1.0% contraction from a year earlier.
• Euro zone monthly economic sentiment falls more than expected (Reuters) Economic sentiment in the 19 countries sharing the euro fell in August to its lowest level since March, a further indication that morale is weakening after Britain voted to leave the European Union. The European Commission’s euro zone Economic Sentiment Indicator (ESI) fell to 103.5 in August from 104.5 in July, its lowest level since March and well below the 104.1 forecast in a Reuters poll of 38 economists. Estimates ranged from 103.0 to 104.9.
• China’s Xi urges boost to economic reforms (Reuters) China’s key reforms have been smooth over the last three years, but implementation needs to be faster, Xinhua news agency said, citing a statement from a meeting chaired by President Xi Jinping on Tuesday. Xi called for solid efforts to advance reforms, with more focus needed on the economy, at the meeting of the Central Leading Group for Deepening Overall Reform. Some analysts say China’s reforms, particularly those of state firms, have been slower than expected.
• France, joining German Economy Minister, urges halt to trade talks with U.S. (Reuters) Current transatlantic trade talks should be halted and a new set started, France’s trade minister said on Tuesday, adding his voice to calls from within Germany for an end to the negotiations. Matthias Fekl said he would request a halt to negotiations with the United States over the Transatlantic Trade and Investment Partnership (TTIP) on behalf of France at next month’s meeting of European Union trade ministers in Bratislava.
• Bank of Nova Scotia hikes dividend as third-quarter profit rises to $1.9 billion, credit losses decline (Financial Post) Bank of Nova Scotia  reported on Tuesday third-quarter earnings that were ahead of market expectations, driven by growth in its domestic and international banking businesses. Canada’s third-biggest lender reported earnings per share of $1.55, up from $1.46 the year before. Analysts had on average expected earnings of $1.48 per share, according to Thomson Reuters I/B/E/S.

Overnight markets

• Overview: US 10yr note futures are down -0.0829% at 131-27, S&P 500 futures are down -0.06% at 2178, Crude oil futures are up 0.55% at $47.24, Gold futures are down -0.41% at $1321.6, DXY is up 0.3% at 95.862.

US Economic Data

• 10:00 AM:  Consumer Confidence Index, August, est. 97.0 (prior 97.3)

Canadian Economic Data

• 8:30 AM: Industrial Product Price Index, m/m, July, 0.2%, est. -0.3% (prior 0.6%)
  •     Raw Material Price Index, m/m, July, -2.7%, est. -1.2% (prior 1.8%)

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