Commentaires

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

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