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Market Update

Tsys slightly higher, off the o/n lows after Q2 Productivity fell 0.5% vs 0.4% exlow volume overnite in TY futures, prices under pressure since Europe after giving up earlier gains. German 10Y bunds moving lower, curve 1bp steeper and the 10Y bund fut trading below its 30d ma (167.01). BOE member McCafferty said the UK may require more stimulus in the coming months. The 10Y gilt yield fell to a record low 0.592% as the BOE gilt buying program resumed but has since reversed with the yield 0.7bps higher 0.619%. European stocks slightly higher, the Nikkei rose another 0.69%. Ten yr Japan govt futures have retraced lower despite a decent 30Y JGB auction. In Canada, GOCs higher after the 8:30 data. Yesterday Can/US spds closed another 1bp tighter across the curve to the tightest lvls since mid June. Light buying from domestics recently according to Candeal, foreign CB buying part in the overnite session a factor recently. In corps, Pembina priced a 10Y deal at 264.8 which was a blowout (CIBC/RY leads deal) with low fills reportedly and which opened ~7bps tighter. There last 10Y issue priced at 225 in Jan of last yr.

News headlines                                                                                            

• Futures flat a day after S&P touches record high (Reuters) U.S. stock index futures were little changed on Tuesday as investors looked for market-moving catalysts, a day after the S&P 500 index touched a record intraday high. On Monday, Wall Street closed down in one of its lowest volume trading day this year, after the S&P slipped from its record high as healthcare stocks weighed.
• China’s slowing wholesale deflation takes pressure off central bank (Reuters) China’s factory price deflation moderated further in July, with prices falling at their slowest pace in two years, taking pressure off the central bank to cut rates as policymakers turn their focus to structural reforms and ballooning credit. A government-led building spree has increased demand for construction materials, but higher prices are also due in part to speculation in China’s commodities futures market, which has pushed up Shanghai rebar futures up by 50 percent this year.
• Oil Steady as OPEC Discussions Seen Unlikely to Result in Action (Bloomberg) Oil traded near the highest close in two weeks as investors weighed OPEC’s plans to hold informal talks next month. Futures gained 0.4 percent in New York after rising 2.9 percent Monday. Members of the Organization of Petroleum Exporting Countries are in “constant deliberations” on stabilizing the market, said Mohammed Al Sada, Qatar’s energy minister and the group’s president.
• Pound Tumbles Below $1.30 as Traders Await More Brexit Bad News (Bloomberg) The pound fell below $1.30 for the first time in almost a month as investors prepared for data that will give further clues on the state of the U.K. economy in the wake of the decision to quit the European Union. Britain’s currency dropped for a fifth day and ceded ground to all of its 16 major peers amid speculation the reports, due next week, will show an economy reeling from the Brexit vote on June 23.
• S. housing agencies would need more taxpayer funds in a crisis: regulator (Reuters) Fannie Mae and Freddie Mac, two government-controlled housing finance agencies, would need a big cash injection to weather another financial meltdown, a government regulator said on Monday. Fannie and Freddie would need as much as $126 billion in taxpayer funds to come through a serious downturn, according to a ‘stress test’ from the Federal Housing Finance Agency.
• Valeant says to reorganize; maintains full-year forecast (Reuters) Valeant Pharmaceuticals International Inc (VRX.N) (VRX.TO) said on Tuesday it would reorganize, and stood by its full-year forecast, as it attempts to restore investor confidence after facing a storm of criticism over its business practices. The Canadian drugmaker has faced intense political and investor scrutiny in the past year for its steep drug price increases and unorthodox use of a specialty pharmacy.
• Canadian auto industry faces biggest existential threat since 2009 crisis as labour talks begin (FinancialPost) The Canadian auto industry is facing its biggest existential threat since the 2009 crisis, with the future of at least three plants at risk as autoworkers gear up to begin labour negotiations this week. Unifor, which represents more than 6,000 Canadian autoworkers, will open talks with General Motors of Canada on Wednesday and with Ford Motor Co. of Canada and Fiat Chrysler Automobiles (FCA) Canada on Thursday. The existing contracts expire on Sept. 19 and the union is already talking openly about the possibility of a strike.

Overnight markets 

• Overview: US 10yr note futures are down -0.071% at 131-31, S&P 500 futures are up 0.08% at 2177.25, Crude oil futures are down -0.53% at $42.79, Gold futures are down -0.19% at $1338.7, DXY is up 0.03% at 96.429.

US Economic Data

• 8:30 AM: Nonfarm Productivity, 2Q P, -0.5%, est. 0.4% (prior -0.6%)
  •      Unit Labor Costs, 2Q P,  2.0%, est. 1.8% (prior 4.5%, revised -0.2%)
  •      IBD/TIPP Economic Optimism, August, est. 47.3% (prior 45.5)

Canadian Economic Data

• 8:15 AM: Housing Starts, July, 198.4k, est. 191.0k (prior 218.3k)

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 lower in follow thru to Friday’s strong July non-farm payrolls, with the US 10Y 1.59 (unch) and the curve slightly steeper out to ten yrs. European stocks higher led by banks, which are higher for the fourth straight day, the Nikkei surged 2.5% led by fin’ls as well.. Euro govt bonds mixed – UK gilts higher as the BOE purchase facility is set to start this week , while German bunds are lower after Ger ind prod surprised to the upside rising 0.8% in June vs 0.7% exp. GOCs modestly higher after outperforming tsys Friday after a very weak Cdn July payroll: -31K with losses concentrated in the full time sector. Can/US ended 6-10 bps tighter across the curve. Provis opening unch, Ont 26s trading down at 84 this morn. Light data this week both sides of the border so bonds likely to key off stocks,Fedspeak etc.

 News headlines                                                                     

• Stock markets and U.S. dollar both climb as ‘risk-on’ mode dominates (Reuters) Stock markets rose on Monday and the dollar extended gains as risk appetite revived following strong U.S. job figures that bolstered expectations of faster growth in the world’s biggest economy. The MSCI All-Country World index .MIWD00000PUS rose 0.4 percent, while the pan-European STOXX 600 index gained 0.2 percent. European stock markets were supported by a broad equity rally on Friday’s payrolls data, and as Europe’s under-pressure banks .SX7P extended gains from lows reached at the end of last month after industry stress-tests showed many of them with relatively weak balance sheets.
• Oil market on path to rebalancing, OPEC monitoring situation – Qatar (Reuters) Qatar’s energy minister, and current OPEC president, said on Monday the oil market is on the path to rebalancing despite the recent decline in global oil prices, adding that OPEC was in continuous talks to stabilise the market. “The recent decline observed in oil prices and the current market volatility is only temporary,” Mohammad bin Saleh al-Sada, Qatar’s minister of energy and industry said in a statement.
• China stocks rise despite weak trade data; Hong Kong up (Reuters) China shares inched up on Monday morning, as a surge in coal stocks and sustained interest in property shares ignited by the Vanke drama offset the impact of worse-than expected trade data. Hong Kong equities rose to eight-month highs, as strong U.S. jobs data on Friday lifted risk appetites globally.
• K. Mortgage Bonds Are the Collateral Damage in Carney’s Stimulus (Bloomberg) Sales of U.K. residential mortgage-backed securities are set to decline, starving investors of highly-rated assets. Bank of England Governor Mark Carney’s exceptional stimulus package will help the U.K. economy ride out the Brexit shock. It won’t help the country’s 77 billion pound ($100 billion) mortgage bond market though. Call it collateral damage: the BOE’s new Term-Funding Scheme, or TFS, — a 100-billion pound program designed to help lower borrowings costs feed through to the real economy — will discourage issuance, according to Bank of America Corp. analysts led by Alexander Batchvarov. Supply of new deals matters because Britain’s residential mortgage-backed securities (RMBS) market is the biggest in Europe and is relied on by investors ranging from pension funds to asset managers as a source of highly-rated paper.
• BOJ board divided on whether monetary easing has limits: July meeting summary (Reuters) Stark divisions in the views of Bank of Japan board members were highlighted on Monday, with some defending unlimited easing of monetary policy and others arguing the BOJ had done enough – to the point of driving big market swings and sapping bond market liquidity. The debate underscores the challenges the central bank face as it attempts to address stagnant price growth and entrenched economic weakness with a dwindling set of policy tools.
• Draghi Jumps Brexit Hurdle to Find Oil Damping Price Outlook (Bloomberg) Whenever Mario Draghi clears a hurdle on his path to higher inflation, a new one appears. Just as the 19-nation economy sends encouraging signals that challenges from Brexit to terrorism won’t derail the modest recovery, a new decline in oil prices is casting a shadow over an expected pick-up in inflation. With growth not strong enough to generate price pressures, the European Central Bank president may have to revise his outlook yet again.
• Allergan’s Profit Beats Estimates as Botox Sales Surge (Bloomberg) Allergan Plc posted second-quarter profit that beat analysts’ estimates as sales surged for its blockbuster wrinkle treatment Botox. Earnings excluding some items were $3.35 a share, the company said Monday in a statement. Analysts surveyed by Bloomberg predicted $3.31 a share. Revenue rose 1.5 percent to $3.68 billion, short of the $3.72 billion average estimate. Allergan, which is based in Dublin but has executive offices in New Jersey, completed the $40.5 billion sale of its generic drugs business to Teva Pharmaceutical Industries Ltd. last week. Chief Executive Officer Brent Saunders has said Allergan plans to use some of the proceeds to pay off debt and buy back shares, though it also will look for “tuck-in deals” that fit its existing lines of business. In April, its $160 billion planned merger with Pfizer Inc. fell through after U.S. regulators introduced rules to limit the tax benefits of the transaction.

Overnight markets

• Overview: US 10yr note futures are down -0.1064% at 132-0, S&P 500 futures are up 0.1% at 2179, Crude oil futures are up 1.84% at $42.57, Gold futures are down -0.22% at $1341.4, DXY is up 0.16% at 96.352.

US Economic Data

• 10:00 AM: Labor Market Condition Index, est. -1.9

Canadian Economic Data

• 8:30 AM: Building Permits, m/m, June, -5.5%, est. 1.5% (prior 1.9%, revised -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 lower after July payrolls surprised to the upside rising 255k vs 188k exp with both May & June revised higher and AHE up 0.3% vs 0.2% exp. Volumes in tsy futures light overnight, flows saw sellers of 5s from foreign CB and Japanese life ins buying of the long end according to MNI. European stocks slightly higher, USD index lower, crude unch, cutting earlier losses and holding close to $42.  German govt bonds lower, curve steeper with long end weighed by profit taking in the long end. GOCs lagging the move lower in tsys as cdn empl disappointed falling 31k vs 10k increase exp, with the unemp rate rising to 6.9% from 6.8% in June. The CAD is sharply lower on the diverging reports – off 140pps at 1.3158. Provis trading down after payrolls, Ont 26 @ 84, Ont 48s @ 96. 10Y spds are ~10 bps narrower over the past month despite a record July for provi (& corp) issuance (~19bln).

 News headlines                                                                          

• Global Stocks Advance With Metals on Stimulus as Dollar Slips (Bloomberg)  Stocks rose around the world and metals gained on speculation central bank stimulus measures will support the global economy. The dollar weakened before a report forecast to show growth in payrolls slowed to this year’s average pace. Miners led European shares to a third day of gains, while emerging markets extended their weekly advance as negative interest rates in Europe and Japan boost demand for riskier assets. Aluminum and zinc led metals higher. A measure of the dollar fell for the first time in three days and Treasuries were little changed. Vodafone Group Plc was offering the longest-maturity corporate bond in sterling this year after borrowing costs in the currency tumbled the most since May 2009.
• Oil prices slip as short-covering rally fizzles (Reuters) Oil prices dipped on Friday, ending a two-day rally, as a glut of crude and refined products weighed on markets and investors eyed a possible stutter in China’s imports. U.S. West Texas Intermediate (WTI) crude futures CLc1 fetched $41.74 per barrel at 0930 GMT (0530 ET), down 19 cents from their last close, after trading as low as $41.44 earlier in the day. They were on track roughly to break even on the week.
• BoE stimulus lifts stocks as U.S. jobs data looms (Reuters) British equities surged to one-year highs on Friday, lifted by the Bank of England’s new stimulus plan, while sterling clambered off one-week lows and the dollar slipped as currency markets positioned for U.S. jobs data.
• German Factory Orders Slide Amid Dwindling Euro-Region Demand (Reuters) German factory orders unexpectedly declined in June as demand for investment goods from within the euro area slumped in the run-up to Britain’s referendum on European Union membership. Orders, adjusted for seasonal swings and inflation, fell 0.4 percent from May, when they rose a revised 0.1 percent, data from the Economy Ministry in Berlin showed on Friday. That’s the third consecutive month demand remained below economists’ estimates. The median in a Bloomberg survey was for an increase of 0.5 percent. Orders dropped 3.1 percent from a year earlier.
• ECB Leaves Investors Guessing on Some Banks’ Stress-Test Results (Bloomberg) The European Central Bank is letting a pall of secrecy hang over the health of some of the continent’s banks. While fellow regulator the European Banking Authority published results of stress tests for 51 banks from Banca Monte dei Paschi di Siena SpA to Deutsche Bank AG, the ECB decided against publicly disclosing the outcome of its own parallel test for 56 additional banks. The ECB, the continent’s top banking regulator, instead left it up to lenders whether they made public information on capital levels, loan quality and leverage.
• Bombardier Posts Wider Than Estimated Loss on C Series Costs (Bloomberg) Bombardier Inc. reported a wider-than-expected second-quarter loss amid rising costs for increased production of the new C Series airliner while managing to burn through less of its cash. The planemaker swung to an adjusted loss of 6 cents a share, according to a statement Friday. Analysts had predicted a loss of 5 cents, according to the average of estimates compiled by Bloomberg. Revenue decreased 6.7 percent to $4.31 billion, compared with an average estimate of $4.18 billion.
• Canada’s Telus posts higher-than-expected profit (Reuters) Telus Corp T.TO TU.N, one of Canada’s three biggest telecom providers, reported a higher-than-expected quarterly profit, helped by lower operating expenses.
• Vancouver-based Telus also raised the low end of its full-year consolidated revenue forecast to C$12.78 billion ($9.82 billion) from C$12.75 billion. It maintained the high end at C$12.88 billion.

Overnight markets

• Overview: US 10yr note futures are down -0.2938% at 132-18, S&P 500 futures are up 0.35% at 2166.75, Crude oil futures are down -0.02% at $41.92, Gold futures are down -0.99% at $1353.9, DXY is up 0.47% at 96.205.

US Economic Data

• 8:30 AM: Trade Balance, June, -44.5b, est. -43.0b (prior -41.1b, revised -41.0b)
• Change in Nonfarm Payrolls, July, 255k, est. 180k (prior 287k, revised 292k)
• Change in Private Payrolls, July, 217k, est. 170k (prior 265k, revised 259k)
• Change in Manufacturing Payrolls, July, 9k , est. 4.0k (prior 14k, revised 15k)
• Unemployment Rate, July, 4.80%, est. 4.80% (prior 4.90%)
• Average Hourly Earnings, m/m, July, 0.30%, est. 0.20% (prior 0.10%)
• Average Hourly Earnings, y/y, July, 2.60%, est. 2.60% (prior 2.60%)

 Canadian Economic Data

• 8:30 AM: Int’l Merchandise Trade, June, -3.63b, est. -2.84b (prior -3.28b, revised -3.50b)
  • Unemployment Rate, July, 6.90% , est. 6.90% (prior 6.80%)
  • Net Change in Employment, July,-31.2k, est. 10.0k (prior -0.7k)
  • Participation Rate, July, 65.4%,  (prior 65.5%)
• 10:00 AM: Ivey Purchasing Managers Index, July, (prior 51.7)

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