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Market update

US Tsys back to bull flattening, futures outperforming on high volume with 319K Sep 10Y contracts traded so far. EGBs higher, bund curve flatter, USD lower vs majors, JPY last 104.64. Global stocks up, highlighted by a 0.84% gain in the Nikkei, 0.64% gain in IBEX while the Dax and Eurostoxx are up 0.14% and 0.20%, respectively. Commodities are mixed, energies down with WTI and Brent off 1.11% and 1.42%, respectively, after rising sharply following yesterday’s API data that showed a 2.2M build. Fed Kashkari was on the tapes in Tokyo, noting the Fed can be patient on raising rates, Fed Mester followed with comments that gradual rate increases are appropriate.Treasuries open NY firmer, 10-year note 1.469%. US stock index futures fractionally higher. Tsy will sell the 1pm ET $12B 30Y reopen Wed; traders may approach it cautiously as weak 10Y reopen Tues broke a string of very strong 10Y auctions.

News headlines

• Stocks Climb With Copper as Brexit-Induced Volatility Subsides (Bloomberg) Wherever you look in global financial markets, signs are emerging that the fallout from Britain’s vote to leave the European Union is under control.  Global stocks are rising for a fifth day, having recovered almost $4 trillion in value lost in the days following the U.K.’s June 23 referendum, and emerging-market shares are at an eight-month high. Copper is rising, boosted by signs policy makers are prepared to act to limit the fallout, while acquisitions have resumed and corporate bond sales are showing signs of picking up. Havens such as the yen and government bonds have given back much of the gains they made since the Brexit vote.
• Brexit, what Brexit? Shares near 2016 highs (Reuters) Stock markets traded within sight of their highest levels this year on Wednesday as the prospect of stimulative economic policy across the developed world eased immediate concern over Britain’s vote to leave the European Union. The swift moves by the Conservative Party that see Theresa May replacing David Cameron as prime minister on Wednesday have helped fund a recovery that, aside from sterling itself, has wiped out the negative reaction to the June 23 vote.
• Japan Cuts Forecasts as Abe Advisers Urge Coordinated Stimulus (Bloomberg) Japan cut its forecasts for growth and inflation as two key advisers to Prime Minister Shinzo Abe urged coordinated stimulus from the government and the central bank to support the ailing economy. Current thinking in the government is for a fiscal package of about 10 trillion yen ($96 billion), according to people familiar with the discussions. Koichi Hamada and Etsuro Honda, who helped the prime minister shape his Abenomics policies, said in separate interviews on Wednesday that any fiscal injection should be done in concert with a boost in monetary policy from the Bank of Japan, which meets later this month.
• Fed’s Mester heartened by U.S. job rebound in June (Reuters) The sharp rebound in U.S. job growth last month eased concerns that the country’s labor market had regressed, a top Federal Reserve official said on Wednesday, repeating she continues to expect gradual interest rate rises.  Cleveland Fed President Loretta Mester, speaking in Sydney, largely repeated a July 1 speech in London in which she said it was too early to judge the full effect of Britain’s vote to leave the European Union on the U.S. economy.
• OPEC sees tighter 2017 oil market, Brexit drag on economy (Reuters) OPEC on Tuesday gave an upbeat outlook for the oil market in 2017, saying global demand for its crude would be higher than its current production and pointing to a supply deficit rather than a sizeable surplus that has weighed on prices. However, the Organization of the Petroleum Exporting Countries in a monthly report also cut its forecast for world economic growth this year, citing increased uncertainty following Britain’s vote to leave the European Union and said the pace of oil demand growth would slow slightly next year, in its first 2017 forecast.
• Spanish Banks Surge as Fears Subside Over EU Mortgage Ruling (Bloomberg)  Spanish banks such as Banco Popular Espanol SA surged after an aide to the European Union’s top court said they may avoid having to refund billions of euros to customers who paid too much interest on home loans before a 2013 ruling on so-called mortgage floors. Spain is entitled to apply the time limit due to the “macroeconomic issues associated with the scale” of the unfair mortgage terms, Advocate General Paolo Mengozzi of the EU Court of Justice said in a non-binding opinion Wednesday. The Luxembourg-based EU tribunal follows such advice in a majority of cases.
• Carney Opens Lehman Playbook at Bank of England (Bloomberg) Mark Carney looks poised to repeat a strategy that served him well during the global financial crisis. As the Bank of England governor seeks to stave off any turmoil after Britain’s decision to quit the European Union, he has cited his experience at Canada’s central bank in 2008 as a guide. Acting early to prevent a deeper downturn became the hallmark of his approach in the prelude to the international slump, a perspective he can bring to the Monetary Policy Committee’s debate this week on whether to cut interest rates.

Overnight markets                                                                                          

• Overview: US 10yr note futures are up 0.1887% at 132-25, S&P 500 futures are up 0.19% at 2149.75, Crude oil futures are down -0.9% at $46.38, Gold futures are up 0.61% at $1343.5, DXY is down -0.06% at 96.38.

US Economic Data

• 8:30 AM: Import Price Index, m/m, June,  0.2%, est. 0.5% (prior 1.4%)
  •      Import Price Index, y/y,  June, -4.8%, est. -4.6% (prior -5%)
• 14:00AM : U.S. Federal Reserve Release Beige Book

 Canadian Economic Data

• 8:30 AM:  Teranet/National Bank HPI, m/m, June, 2.3%, prior 1.8%
  •       Teranet/National Bank HPI, June, 189.55 (prior 185.24)
• 10:00 AM: Bank of Canada Rate Decisions, est. 0.50% (prior 0.50%)

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 sharply lower/steeper, futures underperforming on high volume with 411K Sep 10Y contracts traded. Tsys lower with most global bonds as global stocks soar highlighted by the Nikkei’s 2.46% gain, 1.93% gain in Italy and 1.76% gain in Spain. USD mostly lower vs the majors though higher vs JPY, last 103.93. Commodities mixed, energy better, metals lower, gold off 0.56% at $1347.91 while grains are tiny mixed. MBS and US Swap spreads tighter. US Tsys 10Y opened 1.4235% vs 1.432% at 3:00 pm ET on Monday. It was pretty much straight south for the Tsy mkt from the getgo largely as oil was on a tear higher. Fed Mester again was on the tape, repeating commentary from Monday.

News headlines

• Stocks Advance on Stimulus Bets as Investors Bail on Bonds, Yen (Bloomberg) Global stocks advanced for a fourth day and commodities rose, buoyed by the prospect of stimulus in major economies. Government bonds sank with the yen. The MSCI All-Country World Index reached its strongest level since June 24, and the yen had its biggest two-day slide since 2014 after Japanese Prime Minister Shinzo Abe vowed to speed up efforts to defeat deflation. The pound rose for a third day as Home Secretary Theresa May prepared to take over as the U.K.’s next prime minister. Daimler AG led gains in European stocks and credit markets strengthened after earnings that beat analysts’ predictions. U.S. crude rebounded from a two month low.
• Carney Defends BOE Against ‘Extraordinary’ Brexit Accusations (Bloomberg) Mark Carney denied that the Bank of England undermined its independence by highlighting the risks of a British decision to quit the European Union in the run-up to the referendum. “It’s extraordinary, in all senses of the word,” the BOE governor responded when asked by U.K. lawmakers on Tuesday whether he helped shape the views of financial-stability officials. “That’s not the way the committee works. The chair doesn’t guide conclusions.”
• Futures rise a day after S&P 500 hits record high (Reuters) U.S. stock index futures were higher on Tuesday, a day after the S&P 500 .SPX hit a record high as investor optimism was propelled by a set of strong economic data. The benchmark index, which came close several times this year to topping its May 2015 record, finally broke through on Monday to a new high of 2,143.16.
• Japan to craft stimulus by end-July, may issue construction bonds (Reuters) Japanese Prime Minister Shinzo Abe on Tuesday told his economy minister to compile an economic stimulus package by the end of this month to revive a flagging economy in the face of sluggish private consumption and investment. On Monday, after a landslide victory in Upper House elections and as evidence mounted the corporate sector is floundering due to weak demand, Abe ordered a new round of fiscal stimulus spending.
• May ally says Britain to trigger EU divorce ‘when we’re ready’ (Reuters) Britain will not rush to trigger divorce proceedings with the European Union, a leading ally of incoming Prime Minister Theresa May said on Tuesday as David Cameron bowed out at his final cabinet meeting. May, 59, will on Wednesday replace Cameron, who is resigning after Britons rejected his advice and voted on June 23 to quit the EU, plunging the country into political and economic uncertainty.
• Merkel urges Britain to quickly clarify relationship with EU (Reuters) German Chancellor Angela Merkel said on Monday access to the European Union’s single market meant accepting the bloc’s basic freedoms and rejected suggestions from London that Britain could retain full EU market access while curbing immigration. Speaking at the annual diplomatic corps reception in Meseberg, north of Berlin, Merkel said Britain should clarify quickly how it wants to shape its future relationship with the EU, adding she wanted London to remain an important partner.
• Bank Demand for BOE Liquidity Rises as Brexit Fears Linger (Bloomberg) Banks’ demand for cash increased in the Bank of England’s third liquidity operation since the U.K. vote to leave the European Union sparked financial market turmoil. At the auction of funds in exchange for collateral, 19 days after Britain opted for a so-called Brexit, banks were allotted 2.005 billion pounds ($2.7 billion). That compared with 3.1 billion pounds at a sale in the days following the vote and 1.35 billion pounds last week. The allotment matches the banks’ bids.

Overnight markets

• Overview: US 10yr note futures are down -0.2347% at 132-27, S&P 500 futures are up 0.43% at 2139.5, Crude oil futures are up 2.61% at $45.93, Gold futures are down -0.73% at $1346.7, DXY is down -0.29% at 96.288.

US Economic Data

• 10:00 AM: Wholesale Inventories, m/m, May,  est. 0.2% (prior 0.6%)
  • Wholesale Trade Sales, m/m, May, est. 0.5% (prior 1.0%)
  • JOTLS Job Openings, May,  est. 5650 (prior 5788)

 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

US Tsys marginally lower, belly underperforming, futures in line on avg volume with 246K Sep 10Y traded so far this session. Global stocks sharply higher highlighted by a 3.98% in the Nikkei, 1.65% gain in Dax and 1.31% gain in Eurostoxx. E-mini S&Ps were last up 7.5 pts while E-mini Nasdaq was up 23 pts. USD is mixed, higher vs JPY, but lower vs GBP and EUR. US Tsys 10Y opened Tokyo at 1.3663% vs 1.3629% Friday and printed a session low of 1.3562% around midnight then rose to 1.3847%. The Tsy will sell its 1pm ET today $24B 3Y auction, then $20B 10Y reopening Tues and $12B 30Y reopening Wed, totalling $56B.

News headlines

• Global Stocks Gain With Dollar as Investors Count on Stimulus (Bloomberg) Rising stock markets, a weaker yen and a dollar that’s rallying with industrial metals are showing investor confidence that a sprinkling of stimulus may contain the worst effects of Britain’s vote to leave the European Union, without encouraging the Federal Reserve to raise interest rates. The MSCI All-Country World Index rose for a third day and U.S. equity index futures climbed after a better-than-forecast U.S. jobs report at the end of last week brightened the economic outlook. Japanese shares advanced the most since February and the yen fell for the first time in a week after Prime Minister Shinzo Abe’s ruling coalition won a fresh mandate to unleash pro-growth policies after Sunday’s election. Nickel advanced with copper and crude oil fell to less than $45 a barrel.
• Deutsche Bank chief economist calls for 150 billion euros in EU bank bailout-Welt (Reuters) Deutsche Bank’s (DBKGn.DE) chief economist urged the European Union to set up a 150 billion euro ($165.39 billion) rescue fund to recapitalize European banks, German newspaper Die Welt reported on Monday. “We won’t be able to avoid setting up a bigger program to recapitalize banks,” David Folkerts-Landau told the daily in an interview. “European banks can be recapitalized with 150 billion euros,” he added.
• K.’s FTSE 100 Defies Brexit Blues to Head for Bull Territory (Bloomberg) A third day of gains has put the U.K.’s FTSE 100 Index on course to close in bull-market territory. After recovering from its post-Brexit plunge in just four days, the gauge of U.K. megacaps continued its rally, and is now up 20 percent from its February low. A dramatic plunge in the pound has made the gauge’s multinational companies more attractive since the country’s vote to leave the European Union. Analysts have joined investors and strategists in taking note, boosting profit-growth estimates for FTSE 100 members by about 4.5 percent in just over a week, the biggest such upgrade in more than a decade.
• Japan Abe orders new stimulus package after election win (Reuters) Japanese Prime Minister Shinzo Abe ordered a new round of fiscal stimulus spending after a crushing election victory over the weekend as evidence mounted the corporate sector is floundering due to weak demand. Abe did not give details on the size of the package, but Japanese stocks jumped nearly 4 percent and the yen weakened over perceptions a landslide victory in upper house elections now gives him a free hand to draft economic policy.
• Carney Poised to Steady Ship as BOE Mulls Interest Rate Cut (Bloomberg) Mark Carney’s third week managing Britain’s response to the economic shock of Brexit is about to begin. With U.K. politics in disarray after the nation opted to split from the European Union, the Bank of England governor has been leading the charge in offering stability. After boosting liquidity, freeing banks to lend more and signaling a willingness to loosen monetary policy, Carney will in coming days address lawmakers in parliament and oversee the central bank’s first interest-rate decision since the Brexit vote.
• Dividend cuts ‘a last resort’ for banks under severe oil and gas stress: Moody’s (FinancialPost) Severe stress in the oil and gas sector could prompt some Canadian banks to reduce their dividends, but that would be a last resort, according to analysts at Moody’s Investors Service. In a report Monday, the debt-rating agency stress-tested the impact on bank capital of a severe scenario stemming from low oil prices, and concluded that there are a number of steps Canada’s seven largest banks could take to conserve capital before resorting to trimming their dividend payouts.
• Canadian PM says Russia not been ‘positive partner’ on Minsk ceasefire (Reuters) Canadian Prime Minister Justin Trudeau said on Monday that Russia has not been a “positive partner” as regards its obligations in the Minsk ceasefire agreement to end a Russian-backed separatist conflict in eastern Ukraine. On a visit to Kiev, Trudeau also announced $13 million in new humanitarian aid for Ukraine and an increase in the number of Canadian observers for the Organization for Security and Co-operation in Europe (OSCE) in the eastern Donbass region.

Overnight markets                                                                            

• Overview: US 10yr note futures are down -0.2686% at 133-14, S&P 500 futures are up 0.34% at 2127.75, Crude oil futures are down -0.35% at $45.25, Gold futures are down -0.13% at $1356.6, DXY is up 0.22% at 96.515.

US Economic Data

• 10:00 AM: Labor Market Conditions Index, June, est. 0.0 (prior -4.8)

Canadian Economic Data

• 8:15 AM: Housing Starts, June, est. 189.0k (prior 188.6k)

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