Comments

Market update

Treasuries prices opened weaker, steeper after mkt saw overnight zigzag pattern, 10-year note 1.599%. Then we saw mixed policy signals as Reuters said Japanese government could spend up to Yen 20 Trillion in a stimulus program. European stocks narrowly mixed, ECB left rates unchanged. Tsys trading lower after ECB releases. Bunds saw pre-ECB position tweaking, and also were weighed by supply from France and Spain government debt. Tsys see end user buying of intermediates; official account buying in the Tsys front end. Fast money had mixed flows in the five and ten year notes. Light fast money payers in 2Y, 5Y US swaps. Short end pressured by renewed selling as US$ LIBOR rates again rose to new 7-year highs. Tsy sells a 1pm ET $13B 10Y TIPS auction.

News headlines

• Global stocks nurse nine-month highs before ECB meeting (Reuters) World stocks faded after hitting nine-month highs on Thursday as signals from Japan that its next shot of stimulus won’t include hand-out ‘helicopter money’ cooled the mood. The European Central Bank’s first post-Brexit meeting was due later with expectations that it will keep rates on hold. The European Central Bank’s first post-Brexit meeting was due later with expectations that it will keep rates on hold.
• Kuroda Says No Need and No Possibility for Helicopter Money (Bloomberg) Bank of Japan Governor Haruhiko Kuroda rejected the idea of helicopter money, dousing speculation that this could be the next policy step as prices fall and growth wanes in the world’s third-largest economy.
• Oil steadies as U.S. inventories send mixed signals (Reuters) Oil prices steadied on Thursday after the U.S. Energy Department reported a ninth consecutive weekly drawdown of crude stocks but an overall build in oil inventories. U.S. West Texas Intermediate crude for September delivery CLc1, the new front-month contract from Thursday, was up 12 cents at $45.87 a barrel at 1035 GMT. The August contract expired on Wednesday after rising 29 cents, or 0.7 percent, to settle at $44.94 a barrel.
• Yen touches six-week low, eyes on ECB (Reuters) The dollar touched a six-week high against the yen on Thursday, bolstered by reports of a doubling of initial expectations for economic stimulus from Tokyo and bets that the Bank of Japan (BOJ) will ease policy next week. After sinking briefly below $1.10 on Wednesday, the euro recovered to trade around a quarter of a percent higher on the run-in to an ECB meeting that currency markets seem confident will deliver no great new easing to weaken the currency.
• Brexit Vote Hits Pricing, Not Profits, as Uncertainty Reigns (Bloomberg) The U.K.’s vote to leave the European Union has sown confusion in corporate executive suites, and so far it’s had a greater effect on pricing and planning than on profitability. Engineering giant ABB Ltd., publisher Daily Mail & General Trust Plc and appliance retailer AO World Plc cited rising uncertainty in their quarterly profit reports on Thursday, the busiest day for earnings announcements since the June 23 referendum. Still, consumers are still buying cars, handbags and ice cream, bolstering companies like Daimler AG, Hermes International SCA and Unilever.
• France Demands Explanations From May Over Delays to Brexit Talks (Bloomberg) French President Francois Hollande demanded an explanation from the British government of why it is stalling on its exit from the European Union. Hollande and Irish Prime Minister Enda Kenny called on the U.K. to start the Brexit process as soon as possible and said they both have specific concerns to be addressed during the talks. Britain’s two closest neighbors said their counterpart Theresa May needed to trigger the exit mechanism quickly to allow “orderly negotiations to begin” after a meeting in Dublin Thursday. The French leader returns to Paris to meet with May later in the day.
• Rogers profit beats estimates on wireless, Internet growth (Reuters) Rogers Communications Inc, Canada’s biggest wireless provider by subscribers, posted a better-than-expected quarterly profit as it added more postpaid wireless and Internet subscribers. Rogers added 65,000 postpaid wireless subscribers in the second quarter. Postpaid customers typically use more expensive devices and pay more for service than prepaid subscribers.

Overnight markets 

• Overview: US 10yr note futures are down -0.0474% at 131-30, S&P 500 futures are down -0.12% at 2165, Crude oil futures are down -0.28% at $45.62, Gold futures are up 0.11% at $1320.8, DXY is down -0.23% at 96.976.                                                                

 US Economic Data

• 8:30 AM: Chicago Fed National Activity Index, June, 0.16, est. -0.20 (prior -0.51, revised -0.56)
  •      Initial Jobless Claims,  July 16^th,  253k, est. 265k (prior 254k)
  •      Continuing Claims, July 9^th,  2128k, est. 2137k (prior 2149k, revised 2153k)
  •      Philadelphia Fed  Index, July,  -2.9, est. 4.5 (prior 4.7)
• 9:00 AM : FHFA House Price Index, May, est. 0.4% (prior 0.1%)
• 10:00 AM: Existing Home Sales, June, est. 5.48m (prior 5.53m)
  •        Existing Home Sales, m/m, June, est. -0.9% (prior 1.8%)
  •        Leading Indicator, June, est. 0.2% (prior -0.2%)

 Canadian Economic Data

• 8:30 AM: Wholesale Trade Sales, m/m, May, 0.16%, est. 0.2% (prior 0.1%, revised 0.2%)

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

Both UST and GoC bond yields are trading 1-2 bps higher after another quiet overnight session, with the curve a touch steeper as the longer-end of the curve underperforms. The yield on the benchmark 2Y was last trading at 0.702%, with the 5Y at 1.125%, the 10Y at 1.565% and the Bond at 2.281%. The 2/10-yr curve was last at 86.1 bps, with 2/30s at 157.8 bps. After a busy start to the week, our long end was relatively quiet with only a couple accounts picking away in cash 30s in small size. Dollarama issued $450mm 5-year and there were rumors of a BNS USD 3-year tap (ba/libor offered by .25-.75 bps again led by the front end). ross-border trade saw the 10-yr US/German spread at 160 bps. Donald Trump was confirmed as the 2016 Republican presidential candidate last night at the Republican Convention with Mike Pence confirmed as his running mate for Vice-President.

News headlines

• Stocks Gain With S&P 500 Futures on Earnings as Treasuries Drop (Bloomberg) Positive earnings set the tone for equity markets while the dollar traded at a seven-week high as speculation grew the U.S. will raise interest rates this year. Technology companies and carmakers led the Stoxx Europe 600 Index higher after earnings from software maker SAP SE and Volkswagen AG beat analysts’ estimates. U.S. stock futures signaled shares will approach all-time highs, the dollar advanced for a second day against the euro while Treasuries declined. The lira fluctuated near a record-low as the country’s president vowed to make an “important” announcement in the wake of a failed coup attempt. Gold headed for the lowest close this month.
• Oil edges up in subdued trade before U.S. stocks data (Reuters) Oil prices edged higher on Wednesday in muted trading as investors awaited a clearer signal from weekly U.S. crude inventory data on whether a glut was easing in the world’s largest oil-consuming nation. Global benchmark Brent crude prices LCOc1 were up 20 cents at $46.86 a barrel at 0947 GMT. On Tuesday, the contract settled down 30 cents, or 0.6 percent.
• K. Unemployment Falls Below 5% for First Time Since 2005 (Bloomberg) The U.K. labor market showed continued strength before the country’s decision to leave the European Union. The unemployment rate fell to 4.9 percent in the three months through May, the lowest since the third quarter of 2005, the Office for National Statistics in London said on Wednesday. Economists in a Bloomberg survey had expected the rate to stay at 5 percent. The number of people in work rose 176,000, the most this year, to a record 31.7 million.
• Bank of England sees no clear evidence of sharp Brexit hit yet (Reuters) The Bank of England said it saw “no clear evidence” that a sharp economic slowdown was yet under way after last month’s vote to leave the European Union, though there were signs investment and hiring were being put on hold. The BoE’s regional agents – who are spread around Britain and speak regularly with companies – said on Wednesday that business uncertainty “had risen markedly” but there was little evidence so far that consumers were spending less.
• Brookfield plans $1-billion investment in Indian distressed assets (GlobeMail) Canada’s Brookfield Asset Management Inc plans to invest about $1-billion in Indian distressed assets through a joint venture with the largest lender in the South Asian nation where banks are battling a record $120-billion of sour debt. Brookfield and State Bank of India have signed a preliminary agreement to set up a joint venture for the investments, the firms said on Wednesday. SBI aims to contribute up to 5 per cent of the total investments targeted by the venture, which may also rope in other banks at a later stage, they said.
• Dollar index at 4-month high on strong U.S. data, Fed hike hopes (Reuters) The dollar hit a four-month high against a basket of currencies on Wednesday, bolstered by strong U.S. data and growing expectations that the Federal Reserve may raise rates before the end of the year. Commerce Department data showed U.S. housing starts surged 4.8 percent, underpinning a theme of strength in the economy.
• Canada the G7 dark horse as IMF projects improved growth in 2017 (Financial Post) As the International Monetary Fund cuts its global forecast for the next two years and warns of more fallout from Brexit, Canada is projected to emerge as a dark horse among the world’s advanced economies — at least in the short term. The IMF predicts Canada will bounce from being the third-slowest-growing G7 economy in 2016 to be second strongest — behind only the U.S. — in 2017, according to an outlook released Tuesday, which revised projections from the Washington-based organization’s last report in April.

Overnight markets                                                                     

• Overview: US 10yr note futures are down -0.1063% at 132-3, S&P 500 futures are up 0.22% at 2163.5, Crude oil futures are down -0.2% at $44.56, Gold futures are down -1.03% at $1318.6, DXY is up 0.01% at 97.069.

US Economic Data

• There is no major economic data for today

Canadian Economic Data

• There is no major economic data 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

Market update

Both UST and GoC bond yields are trading 2-3 bps lower after another quiet overnight session.  Equity futures are opening the day down (S&P futures -7.25) with oil prices flat (WTI -0.07%). Tokyo mkts returned after holiday, Jpn stocks up, most Asian stocks lower Outside of Japan many equity markets in Asia have lost ground overnight. Sources cited 10-year UST futures buying while US real money bought 5s, 10s; Asian banks also buying 10s. Credit desks and trading accounts sold 10s. China yuan set at lowest since Oct. 2010. Then London saw Tsys squeezed up, Bunds bid as European stocks extended loss, as traders cite Bloomberg headlines on EU courts decision to back EU state aid rules for national banks, which hurt Italian banks shares. UK had real money and bank portfolio buying in short-end Tsys, bank portfolio seen selling in 10s, swap paying in 2s and 5s, portfolio receivers in 30s. 10) Turkey trims overnight lending rate to 8.75%. Bloomberg reports that the EU and the IMF have agreed to Bank of Greece proposals for easing of some capital controls. IMF head, Lagarde, spoke in New York, covering a broad range of topics including the situation in Turkey, Brexit and Italian banks but there was little to give markets direction.

News headlines

• Stocks Take a Breather as Earnings Disappoint, Treasuries Gain (Bloomberg) After the S&P 500 Index yesterday set its fifth all-time high in six days,  futures signaled on Tuesday that stocks will retreat. The Stoxx Europe 600 Index had its biggest drop in two weeks as Akzo Nobel NV and Rio Tinto Group posted results that missed estimates. U.S. Treasuries and gold rose as investors sought havens, while the Australian and New Zealand dollars weakened after the countries’ central banks signaled they are moving toward interest-rate cuts.
• UK will not invoke EU Article 50 this year, government lawyer says (Reuters) Britain will not begin its formal divorce from the European Union by invoking Article 50 of the Lisbon Treaty this year, a government lawyer told the High Court on Tuesday. Lawyer Jason Coppell indicated however that the government’s current position could change.
• IMF to cut UK and global growth forecasts following Brexit vote (TheGuardian) All eyes will be on the IMF today as it provides its latest update on the global economy. The Washington-based Fund, headed by Christine Lagarde, is expected to downgrade its previous prediction that the global economy will grow by 3.5% in 2017.
• China economy growing, but at only half of official estimates: SMI survey (Reuters) A survey of Chinese sales managers indicates that the economy is growing but at only about half the rate of official estimates, a private survey showed on Tuesday. China’s economy has bottomed out and continues to grow at a low but stable pace, but a major pickup in growth is unlikely this year, according to the latest China Sales Manager Index (SMI) published by World Economics on Tuesday.
• Dollar Climbs Before Data Seen Showing Housing Sector Resilient (Bloomberg) The dollar advanced before an economic report on Tuesday that analysts forecast will show resilience in the U.S. housing sector. Bloomberg’s Dollar Spot Index rose for a third day. Economic data this week are forecast to show housing starts rose in June after contracting in May and continuing claims on unemployment benefits dropped in the week ended July 9, according to Bloomberg surveys of analysts. The dollar’s gain helped to trim this year’s decline that was driven by investors paring expectations for interest-rate increases by the Federal Reserve.
• Goldman Sachs quarterly profit jumps 78 percent (Reuters) Goldman Sachs Group Inc (GS.N) reported a 78 percent jump in quarterly profit as the Wall Street bank earned more from bond trading and its expenses fell. Net income applicable to Goldman’s common shareholders rose to $1.63 billion, or $3.72 per share, in the second quarter ended June 30 from $916 million, or $1.98 per share, a year earlier, when Goldman set aside $1.45 billion for regulatory and mortgage-related legal settlements.
• Turkey Put on Review for Downgrade by Moody’s After Coup Attempt (Bloomberg) Turkey had its debt put on review for a downgrade by Moody’s Investors Service after President Recep Tayyip Erdogan thwarted a coup attempt that erupted over the weekend. Moody’s will look at Turkey’s Baa3 credit rating, the lowest level of investment grade, to “assess the medium-term impact” of the failed coup on the country’s growth and policy-making institutions, according to a statement.

Overnight markets                                                                                           

• Overview: US 10yr note futures are up 0.0947% at 132-5, S&P 500 futures are down -0.19% at 2156, Crude oil futures are up 0.18% at $45.32, Gold futures are up 0.16% at $1331.4, DXY is up 0.58% at 97.124.

US Economic Data

• 8:30 AM Housing Starts, June, 1189k, est. 1166k (prior 1164k, revised 1135k)
  •   Housing Starts, m/m, June, 4.8%, est. 0.2% (prior -0.3%, -1.7%)
  •   Building Permits, June, 1153k, est. 1150k (prior 1138k, revised 1136k)
  •   Building Permits, m/m, June, 1.5%, est. 1.2% (prior 0.7%)

Canadian Economic Data

• There is no major economic data 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