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News headlines

• US tsys higher, US 10Y 1.558 (-1.8bps) curve flatter in ‘risk off’ move as the Nikkei fell 1.5% and the Yen rose on rumors of smaller than expected BOJ stimulus. Japan’s finance minister said the size of the fiscal stimulus package has yet to be decided. Core Euro bonds higher led by 10Y gilts with the 10Y gilt/bund spread at new lows – gilts supported by comments from BOE Weale who favors immediate stimulus for the UK economy. GOCs trading higher in line with tsys, 2s/10s another ~2bps flatter. Provis opening unch after better buying yest afternoon closed spds 1/2bp tighter. Expectations still high for supply based on solid tone, low all in yields part at the 10Y and before tomorrow’s GOC 10Y auction.

 Overnight markets                                                             

• Yen Gains With Bonds Before Central Banks Meet; Stocks Fluctuate (Bloomberg) A sense of caution dominated financial markets Tuesday, with haven assets including the yen and Treasuries gaining as central banks prepared to meet this week in the U.S. and Japan. Worse-than-expected earnings from BP Plc weighed on European stocks.
• Canadian National Railway Co earnings slip as decline in shipments cut into company’s revenue (FinancialPost) Canadian National Railway Co reported slightly lower second quarter earnings on Monday as a decline in shipments cut into revenue, but said it expects volumes to improve in the months ahead. Chief Executive Luc Jobin said the railway faced a “very challenging volume environment” in the quarter, but sees business improving in the second half.
• Brace yourself for a fall in oil prices: Morgan Stanley warns ‘correction is upon us’ (FinancialPost) Gear up for a fall in oil prices. The global oil market is “severely oversupplied” with gasoline — with stocks at a five-year high — serving as a blow to crude prices from next month, reckon Morgan Stanley analysts led by Adam Longson.
• WestJet profit beats as passenger traffic rises, fuel costs fall (Reuters) Canada’s WestJet Airlines Ltd WJA.TO reported higher-than-expected quarterly revenue and profit as its passenger traffic rose and fuel costs fell. WestJet’s fuel expenses, typically an airline’s largest variable cost, declined 15 percent in the second quarter ended June 30.
• Russia’s Currency Is Turning a Blind Eye to Oil Prices (Bloomberg) The Russian ruble is proving surprisingly impervious to the price of oil. The currency of the world’s largest energy exporter has more or less ignored the value of the commodity in the past few months, according to Citigroup Inc. analysts led by Luis Costa.
• Canada is reverting to its pre-1992 telecom conditions (TheGlobeandMail) Some Canadians will recall the early days of Canadian telecom, prior to the introduction of competition 2 1/2 decades ago. Telephone companies such as Bell and Telus were 100-per-cent monopolies, part of a national consortium. In those days, a voice call from Toronto to Vancouver cost $1 a minute, under a guaranteed-rate-of-return regime provided to the consortium companies by Canadian regulators. In essence it was a utility, like the electric power providers.
• Anti-Keystone XL group takes first shot at its new target: Energy East (FinancialPost) The big U.S. green group that led the assault against Keystone XL is firing its opening salvo Tuesday against Energy East, joining an already-crowded field of opponents and proving Alberta’s and Canada’s climate change plans are failing to moderate anti-pipeline campaigns.

Overnight markets                                                                     

• Overview: US 10yr note futures are up 0.0592% at 132-5, S&P 500 futures are down -0.02% at 2161.75, Crude oil futures are down -1.65% at $42.42, Gold futures are up 0.05% at $1327.8, DXY is down -0.16% at 97.134.

US Economic Data

• 9:45 AM: Markit US Service PMI, July, est. 52.0 (prior 51.4)
  •      Markit US Composite PMI, July,  (prior 51.2)
• 10:00 AM: Consumer Confidence Index,  July, est. 96.0 (prior 98.0)
  •      Richmond Fed Manufacturing Index, July, est. -5 (prior -7)
  •      New Home Sales, June, est. 560k (prior 551k)
  •      New Home Sales, m/m, June, est. 1.6% (prior -6.0%)

 Canadian Economic Data

• There is major economic news for 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

News headlines

• US tsys opening slightly lower, US 10Y 1.56% recouping earlier losses as stocks move lower, US stock futures fall into the red. Core Euro bonds also lower led by UK gilts. German bonds lower, steeper weighed by better than exp IFO index as well as long index link gilt deal. Main events for the week revolve around central banks – FOMC on Wed, BOJ Friday. GOCs opening unch, provis unch after closing 3bps tighter last week. QC 48s reopened last week at 102 now 101/100.5 with Q,Ont rumoured as likely supply candidates this week.

Overnight markets                                                                       

• European Stocks Climb on German Confidence as Gold, Bonds Fall (Bloomberg) Equity markets got a boost from a report showing Germany’s business climate remained robust after Britain voted to leave the European Union. Bonds fell with gold before central bank meetings in the U.S. and Japan this week. The Stoxx Europe 600 Index rose for the first time in three days after business confidence in the region’s largest economy proved more resilient in July than economists predicted
• Yellen Still Waiting for Overwhelming Evidence to Warrant Hike (Bloomberg) For Federal Reserve officials, getting better never seems to rise to good enough. Since the policy-setting Federal Open Market Committee last gathered six weeks ago, economic reports have shown one example of U.S. resilience after another following a slow first quarter. When the monetary policy panel meets on Tuesday and Wednesday, a majority of investors expect them to do what they have done at every meeting this year: nothing.
• Oil Trades Near Two-Month Low as Drilling Increases Amid Surplus (Bloomberg) Oil traded near the lowest close in more than two months after U.S. producers increased drilling for a fourth week even as the market contended with abundant supplies. Futures fell 0.7 percent in New York after slipping 3.8 percent last week. U.S. oil explorers expanded the number of rigs in action by 14 to 371 for the longest run of gains since August, Baker Hughes Inc. said Friday. Hedge funds and other money managers added the most bets in a year on lower West Texas Intermediate prices, according to U.S. Commodity Futures Trading Commission data.
• Yahoo Agrees to Sell Web Businesses to Verizon for $4.8 Billion  (Bloomberg) Yahoo! Inc. agreed to sell its main web businesses to Verizon Communications Inc. for $4.8 billion, ending a two-decade run as an independent company that took it from Stanford University startup at the dawn of the internet age to also-ran behind nimbler online rivals such as Google and Facebook Inc.
• G20 will use ‘all policy tools’ to lift growth as Brexit weighs (Reuters) The world’s biggest economies will work to support global growth and better share the benefits of trade, policymakers said on Sunday after a meeting dominated by the impact of Britain’s exit from Europe and fears of rising protectionism. Philip Hammond, Britain’s new finance minister, said the uncertainty about Brexit would begin to abate once Britain laid out a vision for a future relationship with Europe, which could become clearer later this year.
• Australia second-quarter inflation to make or break case for rate cut (Reuters) Australian inflation likely braked to all-time lows in the second quarter, if analyst forecasts prove right, cementing the case for another cut in interest rates as early as next month. When underlying inflation slowed surprisingly sharply to a record low of 1.5 percent in the first quarter, the Reserve Bank of Australia (RBA) responded almost immediately by trimming the cash rate a quarter point to 1.75 percent. ECONAU
• South Korea second-quarter GDP growth expected to top first-quarter, but only just (Reuters) South Korea’s economic growth was expected to show little improvement over April-June versus the first quarter in sequential terms, a Reuters poll found on Monday, as weak exports and capital investment continue to undermine growth. The economy was expected to expand by 0.7 percent in the second quarter from the first on a seasonally adjusted basis, according to the survey, accelerating slightly from 0.5 percent growth in January-March.

Overnight markets

• Overview: US 10yr note futures are down 0% at 132-4, S&P 500 futures are down -0.01% at 2167.25, Crude oil futures are down -1.7% at $43.44, Gold futures are down -0.56% at $1324, DXY is down -0.03% at 97.442.

US Economic Data

• 10:30 AM Dallas Fed Manufacturing Index, July, est. -10.0 (prior -18.3)

Canadian Economic Data

• 10:00 AM Bloomberg Nanos Confidence, July 22 (prior 57.3)

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

Treasuries see some mild flatteners going on. The data today include the 9:45am ET flash July Markit Manufacturing index, then there is the June BLS state payrolls and then the 3pm ET July auction Treasury allotments. Today, positions have achieved better balance, and yields are up on good overnight flows. That balanced description fits global markets as well, with the exception of Asian equities that can’t seem to join the July party.” He adds the “most active trading in 10-yr UST remains concentrated just under 1.60%. excellent participation on the 10-yr TIPS auction Thursday confirmed the large buying that developed about 90 minutes before the sale, the same time oil prices stumbled despite a weaker dollar.

 News headlines

• European Stocks Decline as Commodities Retreat; Pound Slides (Bloomberg) European stocks fell and the pound slid as reports showed the first signs of economic weakness in the wake of the U.K. vote to leave the European Union. The Stoxx Europe 600 Index retreated for a second day after the euro area’s service sector cooled in July while the pound dropped for the first time in three days after business activity in Britain shrank at its fastest pace since the financial crisis. A gauge of commodities fell for a sixth day. The dollar gained.
• Goldman Sees Significant Jump in China June Capital Outflows (Bloomberg) China’s weakening currency has triggered an increase in the amount of cash leaving the country, according to analysis by Goldman Sachs Group Inc. The U.S. bank estimates $49 billion worth of foreign-exchange outflows in June, compared with $25 billion in May. Goldman’s analysis came after China’s top currency regulator released data showing sustained demand for foreign-exchange. The yuan fell 1.1 percent against the dollar and 2.2 percent versus a trade-weighted index last month.
• Crude oil prices face weekly decline as glut fears persist (Reuters) Crude futures were on track for weekly losses on Friday as investors reassessed U.S. data on oil stocks and excesses in oil products in Europe and Asia. While many expect global oversupply of oil to ease in the near term, huge amounts of crude remain in vessels at sea and storage tanks on land as the rebalancing takes longer than some had anticipated.
• Britain’s economy wilting fast after Brexit vote, may prompt more spending (Reuters) Britain’s economy is shrinking, the broadest survey of business confidence since last month’s historic vote to quit the European Union showed on Friday, piling pressure on new Prime Minister Theresa May’s government to soften the impact.
• Moody’s calls for energy executive salaries to reward value preservation rather than growth (FinancialPost) Executive compensation in the oil and gas industry is heavily pegged to achieving growth, but Moody’s Investors Services says the model is outdated given the sector’s “pessimistic” outlook and needs an overhaul.
• Japan’s CPI seen falling again in June, more headaches for BOJ (Reuters) Japan’s consumer prices were expected to fall in June for the fourth straight month, a Reuters poll found, keeping alive market expectations the central bank will expand an already massive stimulus program to hit its 2 percent price goal. Separate data next week is also expected to show exports slumped in June from a year earlier, a sign the economy is suffering from the hit from a strong yen and global uncertainties after Britain’s vote to leave the European Union.
• Euro zone business growing at weakest rate since start of 2015: PMI (Reuters)  Euro zone business growth was at its slowest since the start of 2015 this month as stronger performances in the two big economies of Germany and France offset weakness in smaller countries, a survey showed on Friday.  While the survey result was not as weak as predicted in a Reuters poll, the slight loss of momentum may be of concern to policymakers at the European Central Bank who have been trying to stimulate faster growth.

Overnight markets

• Overview: US 10yr note futures are down -0.1772% at 132-0, S&P 500 futures are up 0.15% at 2161.25, Crude oil futures are up 0.29% at $44.88, Gold futures are down -0.59% at $1323.1, DXY is up 0.11% at 97.107.

US Economic Data

• 9:45 AM: Markit US manufacturing PMI, July, est. 51.5 (prior 51.3)

Canadian Economic Data

• 8:30 AM: Retail Sales, m/m, May, 0.2%, est. 0.0% (prior 0.9%, revised 0.8%)
  •    Retail Sales Ex Auto, m/m, May, 0.9%, est. 0.3% (prior 1.3%)
  •    CPI NSA, m/m, June, 0.2%, est. 0.1% (prior 0.4%)
  •    CPI, y/y, June, 1.5%, est. 1.4% (prior 1.5%)
  •    CPI Core, m/m, June, 0.0%, est. -0.1% (prior 0.3%)
  •    CPI Core, y/y, June,  2.1%, est. 2.0% (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