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Market update 

US tsys mixed, curve flatter US 10Y unch @1.47%, longs well bid for a second day, 10s30s 2bps flatter.  Global stocks higher with the Nikkei +1.59% and Euro stocks ~2%. Commodities higher – crude up another 0.65% after 3% increase yest on API data which showed larger decline in inventories than exp.  Tsys fell in Asia trade as the Nikkei rose for a third day, expectations for further stimulus from the BOJ are fairly high after retail sales posted their third straight y/y decline. GOCs opening weaker, curve flatter, GOC 10Y 1.09% with 1.06% being the post Brexit low Friday. BOC auctions $3.9bln in 2Y notes at noon-reopened 0.25% May 1 18s. Provis tighter again today by 0.5bps after narrowing yest, expect supply with early close tomorrow.

News headlines                                                                                                                                       

• Merkel Says No Way Back From Brexit as Cameron Regrets Loss (Bloomberg) European Union leaders said there could be no turning back for the U.K. after Prime Minister David Cameron used his last EU summit to express disappointment at his failure to win the referendum he called on Britain’s membership. “As of this evening, I see no way back from the Brexit vote,” German Chancellor Angela Merkel told reporters after the meeting in Brussels on Tuesday. “This is no time for wishful thinking, but rather to grasp reality.”
• Stock futures tread higher as Brexit fears ebb (Reuters) U.S. stock index futures were higher for a second day as the initial panic surrounding Britain’s vote to leave the European Union settled and investors sought out bargains. The “Brexit” verdict on Friday sent shockwaves through global markets and wiped out about $3 trillion in a two-day selloff.
• Draghi sees Brexit vote hitting euro zone growth by up to 0.5 percent over three years: official (Reuters) European Central Bank President Mario Draghi told EU leaders on Tuesday that Britain’s decision to leave the EU could reduce euro zone growth by a cumulative 0.3 to 0.5 percent compared to previous estimates over the next three years, an EU official said. Earlier this month, before Britain’s June 23 EU referendum, the ECB estimated that the euro zone would grow in annual terms by 1.6 percent in 2016 and by 1.7 percent in 2017 and 2018.
• Japan’s May retail sales fall more than expected on gloomy recovery outlook (Reuters) Japan’s retail sales fell more than expected in May in a third straight month of annual declines, data showed on Wednesday, keeping policymakers under pressure for more stimulus to support a fragile economic recovery. Retail sales fell 1.9 percent in May from a year earlier, more than a median market forecast for a 1.6 percent declines, data from the Ministry of Economy, Trade and Industry showed.
• German inflation picks up in June, state data suggest (Reuters) German consumer prices rose slightly in June, regional data indicated on Wednesday, suggesting price pressures in Europe’s largest economy are slowly picking up, but they remain weak despite the European Central Bank’s ultra-loose monetary policy. Economists have said Britain’s decision to leave the European Union would further dampen growth and inflation across the euro zone, raising expectations the ECB may beef up its monetary stimulus to mitigate the impact.
• CIBC to Buy Privatebancorp in Deal Valued at $3.8 Billion (Bloomberg) Canadian Imperial Bank of Commerce agreed to buy PrivateBancorp Inc. and one of its units to boost its U.S. presence. CIBC will pay $18.80 in cash and 0.3657 of a CIBC common share for each PrivateBancorp share, it said in a statement on Wednesday. Based on the June 28 closing price of CIBC’s stock, the transaction value is about $3.8 billion, it said.

Overnight markets

• Overview: US 10yr note futures are down -0.0938% at 133-4, S&P 500 futures are up 0.74% at 2043.5, Crude oil futures are up 1.02% at $48.34, Gold futures are up 0.48% at $1324.2, DXY is down -0.43% at 95.827.

US Economic Data

• 8:30 AM: Personal Income,  May, 0.2%, est. 0.3% (prior 0.4%, revised 0.5%)
  • Personal Spending, May, 0.4%, est. 0.4% (prior 1.0%, revised 1.1%)
  • PCE Core, m/m, May, 0.2%, est. 0.2% (prior 0.2%)
  • PCE Core, y/y, May, 1.6%, est. 1.6% (prior 0.6%)
• 10 :30 AM : Pending Home Sales, m/m, May,  est. -1.1% (prior 5.1%)

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 lower, yields 2-4 bps higher, curve flatter with longs outperforming, US 10Y 1.477 (+3.7bps) vs 1.458 at the close yest. Euro stocks 2.7% higher, EU peripheral spds tighter led by Spain. Tsys fell in Asian on Asia real money selling, weakness in core European bonds. GOCs lower, yields 1-2bps higher, GOC 10Y below 1.10%. Provis opening better, Ont 46s trading up at 105,  supply more likely should equities manage to maintain a positive footing.

News headlines

• US. Stock Futures Rise as Stimulus Hopes Outweigh Brexit Fears (Bloomberg) U.S. equity futures climbed, signaling the S&P 500 Index may advance for the first time since the Brexit vote, as optimism grew that policy makers will move to support financial markets. ontracts on the S&P 500 expiring in September jumped 0.8 percent to 2,001.50 at 12:32 a.m. in New York, after the underlying index tumbled 1.8 percent on Monday. More than $974 billion has been erased from S&P 500 stock values in the past two days, the third-most in history, according to data compiled by S&P Dow Jones Indices.
• Battered sterling gets a reprieve, yen’s rally pauses (Reuters) Higher-yielding, riskier currencies such as the Australian dollar rose along with sterling on Tuesday as investors took a breather from a brutal selloff sparked by Britain’s vote to leave the European Union. Safe-haven currencies such as the yen JPY= and the Swiss franc EURCHF=, which had gained sharply since last Thursday’s vote, were weaker, although risk sentiment was fragile.
• Brexit Steamrolls Fed Model for Stock Bulls as Bond Yields Drop (Bloomberg) The dangers of relying on valuation as a tool for market timing are on display right now in U.S. equities. At issue is something known as the Fed Model, a comparison of stock and bond yields that has been pointing bulls to equities for three months. As bond yields fell from their March highs, an investor guided by the theory would have bought shares, betting they’d rally as money flowed into them from fixed-income.
• Japan should not give up right to intervene if yen rises sharply (Reuters) Japan should not give up the right to intervene in currency markets if the yen sharply rises as it will threaten the nation’s economy, a key economic adviser to Prime Minister Shinzo Abe said on Tuesday, after Britain’s vote to exit the European Union caused market turmoil.
• Soros Wagered Deutsche Bank Would Drop in Brexit Turmoil (Bloomberg) Soros Fund Management took a short position in Deutsche Bank AG of about 7 million shares as turmoil from the U.K.’s decision to leave the European Union sent bank stocks lower. The position taken on Friday was equivalent to 0.51 percent of Deutsche Bank’s share capital, according to a German filing published on Monday. The document doesn’t show at which price the fund took the position. The position taken on Friday was equivalent to 0.51 percent of Deutsche Bank’s share capital, according to a German filing published on Monday. The document doesn’t show at which price the fund took the position.
• China economy to grow 6.6 percent, needs policy support: government think tank (Reuters) China’s economy will grow at about 6.6 percent this year, and will need to be underpinned by policy support in the second half to counter downward pressures, according to the China Academy of Social Sciences (CASS). The forecast from one of China’s top government think-tanks was reported by the official Shanghai Securities Journal newspaper on Tuesday, and marked a slightly more downbeat outlook that one given in May, when CASS had forecast growth of 6.6 percent to 6.8 percent for the year.
• S.-UK alliance seen outweighing Brexit trade concerns (Reuters) The United States looks unlikely to follow through on a threat to relegate Britain to second-class trade status once its ally leaves the European Union, as it weighs the potential costs of undermining the countries’ close diplomatic and military ties. President Barack Obama had warned ahead of Thursday’s “Brexit” referendum that Britain would move to the back of the queue on U.S. trade priorities if it voted to leave the bloc, well behind a much-larger U.S.-European trade deal now under negotiation.

 Overnight markets                                                                                    

• Overview: US 10yr note futures are down -0.0938% at 133-5, S&P 500 futures are up 1.26% at 2010, Crude oil futures are up 3.02% at $47.73, Gold futures are down -0.63% at $1316.4, DXY is down -0.63% at 95.934.

US Economic Data

• 8:30 AM: GDP Annualized, q/q,  1Q, 1.1%, est. 1.0% (prior 0.8%)
  • Personal Consumption, 1Q,  1.5%, est. 2.0% (prior 1.9%)
  • GPD Price Index, 1Q, 0.4%, est. 0.6% (prior 0.6%)
  • Core PCE, q/q, 1Q, 2.0%, est. 2.1% (prior 2.1%)
• 10 :00 AM : Consumer Confidence Index, June, est. 93.5 (prior 92.6)
  • Richmond Fed Manufacturing Index, June, est. 3 (prior -1)

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 rallying hard for a second day, yields down 5-10 bps across the curve as the British pound fell below Friday’s post Brexit vote low 1.3250. The FTSE is off 2.0% led by a 7.7% decline in financials. Core European bonds sharply higher, UK 10Y below 1.0% after hitting all time low 0.929%, mkts pricing in near certain odds of a 25 bp rate cut from the MPC at the Sep meeting. IG credit spreads pushing wider, the IG 26 +1.3bps to 87.95 a three month high and the HY cash index +10.5bps to 633. GOCs higher, curve 2bps flatter with the 10Y ~1.12%. Provi spreads another 1-2bps wider after 4bp move on Friday -supply unlikely unless mkt tone improves.

News headlines

• K. Chaos Infecting Markets as Pound Extends Its Record Loss (Bloomberg) Traders have had three days to digest the Brexit vote, and the pound’s slide just keeps getting steeper. Sterling dropped 3.5 percent to $1.3205 at 12:30 p.m. in London on Monday, after reaching a three-decade low of $1.3186 that surpassed its weakest levels during the panicked selling on Friday that followed the U.K.’s decision to leave the European Union. The turmoil extended that day’s unprecedented 8.1 percent tumble and showed that Chancellor of the Exchequer George Osborne’s attempts to calm markets failed to cancel out the effects of the paralysis spreading through U.K. politics.
• Oil prices ease again after Brexit vote (Reuters) Oil prices slipped on Monday as market participants absorbed the shock of Britain’s vote to leave the European Union though some analysts said Brexit would have a limited impact on global fuel demand. Brent crude futures were down 35 cents at $48.06 a barrel by 1123 GMT. U.S. crude was down 42 cents at $47.22 a barrel. Both crude benchmarks slumped about 5 percent on Friday amid plunging global financial markets after the British referendum results gave an unexpected 52 percent to 48 percent victory to the campaign to take Britain out of the EU.
• China Weakens Yuan Fixing by Most Since August as Dollar Surges (Bloomberg) China weakened its currency fixing by the most since last August as global market turmoil spurred by Britain’s vote to leave the European Union sent the dollar surging. The People’s Bank of China set the reference rate 0.9 percent weaker at 6.6375 a dollar. A gauge of the greenback’s strength jumped 2.4 percent in the past two days, the most since 2011, as the British pound and the euro tumbled. The yuan dropped 0.3 percent to 6.6473 as of 6:44 p.m. in Shanghai, heading for its weakest close since December 2010.
• Fed’s Yellen pulls out of ECB gathering in Portugal (Reuters) Federal Reserve Chair Janet Yellen is no longer due to speak at a global central bank summit starting on Monday, the second high-profile defection after the Bank of England’s governor pulled out following Britain’s vote to leave the European Union. An updated version of the program of the event, organized by the European Central Bank, showed on Monday that a panel with Yellen, ECB President Mario Draghi and BoE Governor Mark Carney had been taken out. Carney had canceled his attendance over the weekend
• Hoarding Cash in Vaults Seen More Attractive After Brexit Vote (Bloomberg) Investors will consider hoarding cash in vaults as government bond yields fall deeper into negative territory following the U.K.’s vote to leave the European Union, according to Talanx AG, Germany’s third-biggest insurer. “Storing physical cash as an alternative to paying negative interest rates does look increasingly attractive,” Chief Financial Officer Immo Querner said in an interview.
• Credit Markets Were Much Less Prepared for Brexit Than Stocks (Bloomberg) Have credit investors become so inured to years of cheap money and central bank bond buying that they simply sleepwalked into one of the biggest risks to financial markets in years? The credit markets shrugged off Britain’s referendum on European Union membership, according to Bank of America Corp. analysts led by Michael Contopoulos.

 Overnight markets                                                                     

• Overview: US 10yr note futures are up 0.6374% at 133-7, S&P 500 futures are down -0.58% at 2006.75, Crude oil futures are down -1.99% at $46.69, Gold futures are up 0.84% at $1333.5, DXY is up 1.12% at 96.518.

 US Economic Data

• 8:30 AM: Advance Goods Trade Balance, May, -60.6b, est. -59.4b (prior -57.5b)
• 9:45 AM: Markit US Service PMI, June, est. 51.9 (prior 51.3)
  •      Markit US Composite PMI, June, (prior 50.9)
• 10:30 AM: Dallas Fed Manf.  Activity, June, est. -15.0 (prior -20.8)

 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