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Market update

US tsys sharply higher, gapping higher in Tokyo on strong volume in TY futures (427k) with the 10Y yield reaching record low 1.375% in London, and the 30Y also record low 2.1395%. The tsy 5/30 curve flattest since April 2015. Commodities mixed – silver and gold new highs, crude off 3.0%. European stocks -1.8%,Nikkei -0.67%, US stocks futures -0.67%.  Core European bonds higher, led by 10Y Gilts 0.81% – thou gilts have been pressure since the BOE decision to cut bank capital requirements for UK banks, Carney warning the UK current account is vulnerable . Also Standard Life announced they are suspending trading in UK real estate fund. GOCs opening higher, longs outperforming, 10s30s 1.1 bps flatter , provis opening unch, all in yields at new lows across the curve.

News headlines

• Pound Slides With Stocks as Record-Low Yields Paint Glum Outlook (Bloomberg) The pound is weakening anew, bond yields are falling to records around the world, and both stocks and commodities are starting to move lower. It all adds up to a gloomy outlook for the global economy as trading picks up after the Fourth of July holiday in the U.S. All industry groups on the Stoxx Europe 600 Index fell, led by insurers and financial services companies, as the implications of the U.K.’s shock decision to quit the European Union made themselves felt.
• Pound Tumbles to 31-Year Low as Its Post-Brexit Selloff Resumes (Bloomberg) The pound fell to its weakest level in three decades against the dollar, surpassing lows reached in the aftermath of Britain’s vote to leave the European Union. Sterling sank to its lowest since 2013 against the euro. It pared its losses slightly as Bank of England Governor Mark Carney outlined more tools to contain the fallout from the U.K.’s decision to quit the bloc. Speaking in London, he said his concerns about sterling declines had been borne out since the Brexit vote, while adding that the currency’s decline should help exporters.
• Bank of England eases rules for banks to meet Brexit challenge (Reuters) The Bank of England took steps to ensure British banks can keep lending and insurers do not dump corporate bonds in the “challenging” period that is likely to follow the country’s shock vote to leave the European Union. The central bank said it would lower the amount of capital banks are required to hold in reserve, freeing up an extra 150 billion pounds for lending in a reversal of a decision it took earlier this year, when it started tightening screws on lenders because Britain’s economy appeared on course for more growth.
• Property Stocks Slump After Standard Life Freezes U.K. Fund (Bloomberg) Commercial-property companies slumped after Standard Life Investments suspended trading in its 2.9 billion-pound ($3.9 billion) U.K. Real Estate fund on Monday as redemptions surged in the wake of Britain’s vote to leave the European Union. The fund, which invests in a mix of prime commercial real estate assets, was halted at midday and the decision will be reviewed every 28 days, the Edinburgh, Scotland-based fund manager said in a statement. Standard Life adjusted the value of the underlying assets by 5 percent last week.
• Oil falls below $50 on economic concerns (Reuters)  Oil fell below $50 a barrel on Tuesday as concern about a potential slowdown in economic growth that would sap demand trumped supply outages in Nigeria and other exporting nations. Trade in one of Britain’s largest property funds was suspended in a sign of financial stress following the country’s vote to leave the EU. A flurry of data from China in coming weeks is expected to show weakness in trade and investment. Brent crude was down 99 cents at $49.11 a barrel at 1039 GMT. The global benchmark is still up more than 80 percent from a 12-year low close to $27 reached in January. U.S. crude was down $1.15 at $47.84 a barrel.
• Steady business growth seals off modest second quarter (Reuters) Euro zone business growth held steady in June, but the modest pace suggested economic growth in the second quarter was half the rate of January-March, even as a rebound in Italy and rapid acceleration in Spain brightened the outlook. In France, the euro zone’s second largest economy, data showed both services and manufacturing contracting. The majority of the surveys were completed before Britain voted on June 23 to leave the European Union, meaning the after-shocks of the referendum have yet to be reflected in the data.

 Overnight markets                                                                                       

• Overview: US 10yr note futures are up 0.4696% at 133-23, S&P 500 futures are down -0.51% at 2085.5, Crude oil futures are down -2.82% at $47.61, Gold futures are up 0.79% at $1349.6, DXY is down 0% at 95.648.

US Economic Data

• 9:45 AM: New York ISM, June, (prior 37.2)
• 10:00 AM: Factory Orders,  May, est. -0.8% (prior 1.9%)
  • Factory  Orders,  Ex Trans. May, (prior 0.5%)
  • Durable Goods Orders, May F, est. -2.2%, (prior -2.2%)
  • Durables Ex Transportation, May F, est. -0.3%, (prior -0.3%)

 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

News headlines

• Commodities Advance, Boosting Miners; European Equities Decline (Bloomberg)  Precious metals led commodities higher, boosting mining stocks, on speculation central banks in some of the world’s leading economies will step up monetary stimulus in the wake of Britain’s decision to leave the European Union.
• K. Construction Shrinks at Fastest Pace Since 2009 on Brexit (Bloomberg) U.K. construction unexpectedly shrank at the fastest pace since 2009 in June as the impending vote on Britain’s European Union membership stymied residential building.
• British government faces legal challenge over Brexit trigger (Reuters) Law firm Mishcon de Reya said it had started legal action to demand the British government win legislative approval from Parliament before triggering a formal divorce from the European Union.
• Oil climbs as market seen in balance, but slow demand weighs (Reuters) Oil prices rose on Monday following comments from the Saudi energy minister that the market was heading towards balance, although signs of slowing demand in Asia weighed.
• Japan firms’ price expectations slide, keep BOJ under pressure (Reuters) Japanese companies’ inflation expectations fell slightly in June from three months ago, the Bank of Japan’s tankan survey showed, adding to growing doubts over its argument that aggressive money printing will accelerate price growth to its 2 Photographer: Andrey Rudakov/Bloomberg
• Russian Oil Exports Set for Record as Europe Competition (Bloomberg) Russian crude exports are on track to set a record this year, which is intensifying competition in Europe as Iran boosts shipments to the region.
• Brazil Economists Forecast Slower Inflation on Stronger Currency (Bloomberg) Brazil economists reduced their 2016 inflation forecast for the first time in seven weeks as they foresee a stronger currency this year and next.

 Overnight markets                                                                                      

• Overview: US 10yr note futures are up 0.0822% at 133-6, S&P 500 futures are up 0.13% at 2099, Crude oil futures are up 0.31% at $49.14, Gold futures are up 1.14% at $1354.3, DXY is down -0.02% at 95.631.

 US Economic Data

• There is no major economic data for today.

 Canadian Economic Data 

• 9:30 AM: RBC Canadian Manufacturing Index, June, (prior 52.1)
• 10:00 AM: BOC Business Outlook Survey, Q2 (prior 16.00)
  •        BOC Senior Loan Officer Survey, Q2 (prior 6.6)

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, recovering from earlier losses which saw the 10Y go above 1.54% after yesterday afternoon selloff, 10Y now 1.51%. GOCs higher, in line with tsys – both tsys/GOCs bid on drop in crude below $49, reversal in European equities. Little reaction to Apr GDP which came in as exp ( 0.1%, 1.5% y/y). Core Euro bonds underperforming with the German yield curve 1bp steeper on better than exp German unemp data & higher Eurozone CPI. JGBs lower, curve 4bps steeper after the BOJ left amt of govt bond purchases for July unch from June at 8-12T yen. Provis narrowed further yest, Ont 48 issue @ 104 closed 102/101, hit at 102 early this morn. Ont 46/26 roll 13/12.5 3bps wider over the week.

News headlines

• World stocks poised for worst month since January (Reuters) European stocks and the pound held on to a third day of gains as the immediate market flurry over Britain’s vote to pull out of the European Union settled. The rebound was not enough, however, to offset the sharp losses suffered in the aftermath of last week’s vote which have put global stocks on track for their worst monthly performance since January.
• Exclusive: China to tolerate weaker yuan, wary of trade partners’ reaction – sources (Reuters) China’s central bank is willing to let the yuan fall to 6.8 per dollar in 2016 to support the economy, which would mean the currency matching last year’s record decline of 4.5 percent, policy sources said. The yuan is already trading at its lowest level in more than five years, so the central bank will aim to ensure a gradual decline for fear of triggering capital outflows and criticism from trading partners such as the United States, said government economists and advisers involved in regular policy discussions.
• China central bank criticizes media for publishing ‘inaccurate information’ on yuan rate (Reuters) China’s central bank criticized the media on Thursday, saying some media continuously publish “inaccurate information” on the yuan foreign exchange rate, which help some “speculative forces” short the yuan. Recent media reports on the yuan interrupt normal operation of the foreign exchange market, the People’s Bank of China said in a notice on its website, adding that China does not intend to compete in international trade by depreciating the yuan.
• German economy’s domestic strength seen cushioning Brexit fallout (Reuters) German retail sales rose in May and unemployment fell further in June as upbeat consumers and local firms drive growth in Europe’s largest economy, where the renowned engineering sector sees no immediate impact from the ‘Brexit’ vote. Economists have warned that Britain’s decision to leave the European Union is likely to hit German exports and reduce growth by as much as half a percentage point next year.
• Soros Says Brexit Has ‘Unleashed’ a Financial-Markets Crisis (Bloomberg) Britain’s decision to leave the European Union has “unleashed” a crisis in financial markets similar to the global financial crisis of 2007 and 2008, George Soros told the European Parliament in Brussels. “This has been unfolding in slow motion, but Brexit will accelerate it. It is likely to reinforce the deflationary trends that were already prevalent,” the billionaire investor said on Thursday.
• Bell Canada loses second attempt to limit competitor access to its fibre networks (Reuters) Canada’s telecom regulator quashed Bell Canada’s second attempt to make it harder for competitors to buy wholesale access to its high-speed networks, a decision that will enable indie Internet providers to buy and resell access to ultra-fast fibre Internet connections. In a decision released Wednesday, the Canadian Radio-television and Telecommunications Commission (CRTC) denied Bell’s application to place restrictions on which companies could buy access to its disaggregated wholesale high-speed service. The ruling means any service provider — typically those without enough cash to lay fibre themselves — will be able to purchase access to the expensive new fibre networks that connect directly to consumers’ homes.
• Taiwan’s central bank cuts rates for fourth time to revive economy (Reuters) Taiwan’s central bank trimmed interest rates for the fourth consecutive meeting on Thursday, saying fiscal stimulus and economic restructuring were also needed to revive the economy. The widely expected rate cut comes a week after Britain voted to leave the European Union, setting off unprecedented market volatility and clouding global growth prospects that will likely be a drag on Taiwan’s technology sector.                                         

Overnight markets     

Overview: US 10yr note futures are down -0.1761% at 132-27, S&P 500 futures are up 0.02% at 2067.25, Crude oil futures are down -1.98% at $48.89, Gold futures are down -0.38% at $1321.8, DXY is down -0.03% at 95.736.                                                                                                                         

US Economic Data

• 8:30 AM: Initial Jobless Claims, June 25, 268k, est. 267k (prior 259k, 258k)
  •      Continuing Claims, June 18, 2120k, est. 2151k (prior 2142k, 2140k)
• 9:45 AM: Chicago Purchasing Manager Index, June, est. 51.0 (prior 49.3)
  •       Bloomberg Consumer Comfort Index, June 26,  (prior 49.3)

Canadian Economic Data

•  8:30 AM :  GDP, m/m, April, 0.1%, est. 0.1% (prior -0.2%)
  •         GDP, y/y, April, 1.5%, est. 1.4% (prior 1.1%, revised 1.2%)
  •         Industrial Product Price, m/m, 1.1%, est. 0.3% (prior -0.5%)
  •         Raw Materials Price Index, May, 6.7%, est. 5% (prior 0.7%)

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