Commentaires

Market update

US tsys opening lower, 10Y 1.39 (+2bps), moving slightly lower after better than exp ADP employment (172K vs 160K). Core Euro bonds lower led by 30Y gilts, which at 1.60% are still ~60bps lower post Brexit – the 10Y gilt auction saw strong demand (b/c 2.33 vs 1.79 in May) which has the gilt curve 2bps steeper. Equities mixed o/n as the Nikkei fell while the FTSE & Euro Stoxx are both higher, S&P mini off 2.5pts. Crude higher for a second day close to $48 after API data showed inventories fell last week. GOCs opening weaker, thou longs are well bid for a second day 10/30 another 1.5bps flatter @56.4 – despite steeper curves in the US & core Europe. The flattening in global bond curves has been fairly relentless over the past two weeks, more talk of reach for yield in a negative yield environment as well as pension demand for duration. Provis opening unch after closing 1-1.5bps tighter yest on no supply.

News headlines

• European Stocks Rise as Oil Advances Toward $48; Pound Rebounds (Bloomberg) Stocks rebounded from one-week lows in Europe and Asia as oil rose as industry data showed U.S. crude stockpiles fell. The pound advanced after setting fresh three-decade lows for two days. The Stoxx Europe 600 Index gained for the first time this week and emerging markets gained amid a subdued outlook for higher U.S. rates after Federal Reserve minutes showed officials were losing confidence in the economy’s ability to withstand a hike. U.S. equity index futures were little changed, while crude approached $48 a barrel. Sterling rallied after tumbling 2.7 percent against the dollar on Tuesday and Wednesday.
• Yuan Tumbling Again Leaves Investors Unperturbed in Win for PBOC (Bloomberg) The last time China’s currency was sinking this fast, investors around the world responded by fleeing riskier assets. Now, they’re taking the declines in stride. While the yuan has depreciated 1.5 percent over the past two weeks to the lowest level since November 2010, developing-nation and U.S. equities have held steady over the same period and the VIX volatility index has tumbled. Even the added headwind of Britain’s vote to leave the European Union has failed to derail markets that just six months ago convulsed with every move lower in the Chinese currency.
• China June forex reserves unexpectedly rise but outflow fears persist (Reuters) China reported a surprise increase in June foreign exchange reserves on Thursday, but analysts said they could fall again in coming months if the weakening yuan triggers more capital outflows. Even as the yuan slides to 5-1/2 year lows against the dollar and the economy struggles, official data suggest speculative capital flight is under control for now, thanks to the country’s capital controls.
• K. Industrial Output on Course for Positive Second Quarter (Bloomberg) U.K. industrial producers are on course to post their first positive quarter in almost a year after they cut output by less than economists forecast in May. Output at factories, utilities and mines fell 0.5 percent following an upwardly revised 2.1 percent surge in April, the Office for National Statistics said on Thursday. Economists in a Bloomberg survey had predicted a 1 percent drop. Manufacturing contracted by 0.5 percent, also less than expected.
• S&P warns of possible downgrade to Australia’s coveted rating, cuts outlook (Reuters) Standard & Poor’s on Thursday warned of a downgrade to Australia’s coveted triple-A credit rating within two years, saying the knife-edge July 2 election may have weakened the government’s ability to tackle its budget deficits. It cut its outlook on Australia to negative from stable and said there is a one-in-three chance of a ratings downgrade should the government fail to materially improve its balance sheet.
• S. Drops Libor Charges Against ICAP Trio After U.K. Acquittals (Bloomberg) U.S. prosecutors dropped a criminal complaint over Libor against three former ICAP Plc brokers after the men were acquitted by a U.K. court earlier this year. The case against Darrell Read, Colin Goodman and Danny Wilkinson was closed in a New York court on June 30, according to documents. The decision comes after the men were acquitted in January following a four-month trial with three other brokers from different institutions.
• PepsiCo Lifts Earnings Forecast as North American Sales Gain (Bloomberg) PepsiCo Inc. posted second-quarter profit that beat analysts’ estimates and raised its full-year forecast as sales of snacks and soft drinks in North America helped overcome weaker results abroad.  Earnings rose to $1.35 a share, excluding some items, the Purchase, New York-based company said in a statement Thursday. Analysts estimated $1.29, on average. PepsiCo boosted its forecast for annual earnings growth to 9 percent from 8 percent.

Overnight markets                                                                                               

• Overview: US 10yr note futures are down -0.152% at 133-15, S&P 500 futures are down -0.04% at 2093.25, Crude oil futures are up 1.16% at $47.98, Gold futures are down -0.22% at $1364.1, DXY is down -0.03% at 96.028.

US Economic Data

• 8:15 AM: ADP Employment Change, June, 172k, est. 160k (prior 173k, revised 168k)
• 8:30 AM: Initial Jobless Claims, July 2^nd,  254k, est. 269k (prior 268k, revised 270k)
  • Continuing Claims, June 25^th, 2124k, est. 2120k (prior 2120k, revised 2168k)
  • Building Permits, May, m/m,  -1.9%,  est. 1.5% (prior -0.3%, revised 0.1%)
• 9:45 AM: Bloomberg Consumer Comfort Index, July 3^rd, (prior 43.9)

Canadian Economic Data

• 10:00 AM: Ivey Purchasing Manager Index, June,  est. 51.2 (prior 49.4)

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

Another risk off session overnite, US tsys sharply higher, curve 4bps flatter, US 10Y 1.33 (-4bps) with UK gilts outperforming amid lower European stocks and a collapse in the GBP below 1.30. UST 10& 30Y yields at new record lows with some profit taking in London when the 10Y fell below 1.345% (MNI). Only secondary data today in the US but mkts will focus on FOMC minutes from last month’s meeting. The details of the Fed’s discussion on employment in view of the more downbeat statement and lowering of ‘dot plots’ will be carefully analyzed. GOCs higher, spds 1bp narrower vs tsys, curve 2bps flatter led by 10s which are below 1.0% for the first time since Feb. 5Y auction later today -reopened 0.75% sep 21s for $3.8bln with the yield@0.57% which would mark a record low auction yield vs 0.75% at the May 5Y auction. The roll (vs Mar21s) 4.3/4.2 is flatter this week yet could easily narrow further given the 2s5s is 4bps as well.

News headlines

• Record-Low Yields Abound as Brexit Stresses Grow; Yen, Gold Gain (Bloomberg) It’s safety first for investors around the world as they assess the significance of Britain’s vote to leave the European Union. Demand for haven assets sent bond yields to record lows after Federal Reserve Bank of New York President William Dudley said Brexit’s significance could escalate if it triggers turmoil in markets beyond the U.K. The yen climbed to its strongest level since June 24, when the results of the British referendum first roiled global markets, and gold jumped to a two-year high, boosting shares of companies that mine precious metals. That didn’t prevent a gauge of global stocks from losing ground for a second day. Sterling touched its lowest level in more than three decades.
• Gold Climbs to Two-Year High as UBS Sees Start of New Bull Run (Bloomberg) Gold climbed to a two-year high as investors sought a haven from the tumult in financial markets, with UBS Group AG saying bullion is probably at the beginning of its next bull run. The metal rose for a sixth day in London, reaching $1,371.39 an ounce, as stocks and the pound slid in the wake of the U.K.’s vote last month to leave the European Union. Gold may climb to $1,400 in the short term, according to UBS, which sees prices averaging $1,340 in the second half of this year.
• Oil edges lower as strong dollar, economic concerns weigh (Reuters) Oil prices edged lower on Wednesday, extending losses to a third straight session, as a stronger dollar weighed and economic concerns rose following Britain’s vote to leave the European Union. Investors also awaited data on U.S. crude inventories, delayed due to Monday’s Independence Day holiday. Global benchmark Brent futures were down 30 cents at $47.66 a barrel at 0852 GMT after a 4.1 percent drop on Tuesday. U.S. crude traded at $46.35 a barrel, down 25 cents. The contract fell 5 percent to end at $46.60 on Tuesday.
• Germany doesn’t want post-Brexit ‘race to bottom’ on taxes: Schaeuble (Reuters) Germany does not want a « race to the bottom » on tax policy in Europe, Finance Minister Wolfgang Schaeuble said on Wednesday when asked about reports that British finance minister George Osborne plans to cut corporation tax.
• Japan government spokesman: Can see risk-off selling in forex market (Reuters) A Japanese government spokesman said on Wednesday that risk-off selling can be seen in the foreign exchange market, as the dollar slid below 101 yen JPY=. Deputy Chief Cabinet Secretary Hiroshige Seko also told a news conference that the government would refrain from commenting specifically on forex and long-term interest rates. Recent yen surges spurred by Britain’s decision to leave the European Union add to headaches for Japanese policymakers, who are worried about the effect a strong yen could have on exports.
• Britain must respect all EU rules to keep access to markets: ECB’s Villeroy (Reuters) Britain must respect all EU rules if London aims to keep access to the bloc’s financial markets after it leaves the European Union, ECB governing council member Francois Villeroy de Galhau said on Wednesday.
• Loblaw sends strongly worded letter to major suppliers, asks group to lower costs (FinancialPost) Loblaw president Galen Weston, who observed in May that consumers were getting fed up with rising food prices, now wants his company’s largest suppliers to shoulder a bigger part of the inflationary burden. In a strongly worded letter to its large suppliers this week, Loblaw is asking the group to cut costs by 1.45 per cent for shipments received by the country’s largest grocery chain on or after Sept. 4.

Overnight markets                                                                                          

• Overview: US 10yr note futures are up 0.0233% at 133-30, S&P 500 futures are down -0.48% at 2072.75, Crude oil futures are down -1.01% at $46.13, Gold futures are up 1.07% at $1373.2, DXY is down -0.01% at 96.161.

US Economic Data

• 8:30 AM: Trade Balance, May, est. -40.0b (prior -37.4b)
• 9:45 AM: Markit US Services PMI, June F, est. 51.3 (prior 51.3)
  •      Markit US Composite PMI, June F, (prior 51.2)
• 10:00 AM:  ISM Non-Manf. Composite, June est. 53 (prior 52.9)
• 14:00 AM:  U.S. Fed Realeases Minutes from June 14-15 FOMC Meeting

Canadian Economic Data

• 8:30 AM:  Int’l Merchandise Trade, May, est. -2.70b (prior -2.94b)

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 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