Commentaires

Market update

Tsys opening slightly higher, US 10Y 1.73% (-1bp), below avg volume in TY1 futures. Core Euro bonds mixed, with short end yields higher, longs 1-2bps lower led by German 30Y bunds. Crude 1.1% higher above $50 – crude inventories forecast to have fallen by another 3mln barrels for the week ended June 3rd. S&P futs higher after rising to new The Netherlands sold E4.812bln of new 5Y bonds at -0.233% with an order book of ~E12bln (MNI). The UK sold GBP1.5bln Dec 46 gilts at record low 2.09%, thou with a large 1.5bp tail – long gilt/bund spd ~3bps wider. GOCs are unch, off the lows as stock futures pare gains, provi spds 1bp wider – Ont 46 103/102, Ont 26 92/91. Some selling late yest vs Sinai Health deal (Aa2) ($200mln 40Y @ 164). CPPIB Capital (Aaa/AAA) lauched $1.25bln 3Y at 55 or 23bps over CMBs.

News headlines

• Stocks Rally With Emerging Markets on Yellen; Pound Advances (Bloomberg) Stocks rallied with emerging markets as investors added to bets that U.S. interest rates will stay lower for longer, keeping growth on track. The MSCI All Country World Index headed for its strongest close since April after Federal Reserve Chair Janet Yellen signaled that officials won’t derail the economy with a premature rate hike. Emerging-market stocks and currencies advanced for a fourth day. The South Korean won surged the most in six years, and the currencies of Australia and India rose after the nations’ central banks kept interest rates unchanged. The pound rose as a poll showed the campaign to keep Britain in the European Union ahead. The Bloomberg Commodity Index halted a four-day gain that had pushed it to a bull market.
• China forex reserves fall to $3.19 trillion, lowest since Dec 2011 (Reuters) China’s foreign exchange reserves in May fell to $3.19 trillion, central bank data showed on Tuesday, the lowest since December 2011, likely due to the impact of a stronger dollar. Economists polled by Reuters had predicted foreign exchange reserves would fall to $3.20 trillion from $3.22 trillion at the end of April
• Euro-Area Economy Grows Faster as Consumption Gathers Pace (Bloomberg) The euro-area economy grew faster than previously estimated at the start of the year, driven by investment and a pickup in consumer spending. Gross domestic product rose 0.6 percent in the first quarter, the European Union’s statistics office in Luxembourg, said on Tuesday. That’s the rate Eurostat initially reported on April 29 before revising growth down to 0.5 percent on May 13. After growing at the fastest pace in a year, the European Central Bank predicts the 19-nation economy will slow in the second quarter, with inflation rates likely to remain very low or even negative.
• Yellen Insists Fed Increase En Route as Focus Moves to September (Bloomberg) June is out. July might be too soon. The Federal Reserve’s next interest-rate increase is coming, but even September isn’t a sure bet. That’s the message investors and economists are taking from Chair Janet Yellen’s remarks Monday. Her comments were the last the public will hear from a Fed official before the central bank’s policy-setting meeting next week. In her remarks, Yellen was clear that she’s fairly sure the economy will improve enough to warrant another interest-rate increase. She also has lingering uncertainties that may take several months to resolve.
• China, U.S. agree to push for IMF reforms for emerging economies: vice premier (Reuters) China and the United States agreed to push forward reforms at the International Monetary Fund (IMF) to increase quotas for emerging economies, China’s vice premier Wang Yang said on Tuesday. The United States also will fully consider the impact that normalizing monetary policy will have on international markets, he added, at the end of high-level talks between China and the United States in Beijing.
• Australian dollar jumps 1 percent after shift in tone from RBA (Reuters) The Australian dollar gained more than 1 percent against its U.S. counterpart on Tuesday after the Reserve Bank of Australia kept interest rates on hold and appeared to raise the bar on further monetary easing. The Aussie AUD=D4 climbed to $0.7454, its highest since May 6, and rose 1 percent against the yen and the euro. The RBA kept the cash rate at a record low 1.75 percent at its monthly review, after cutting last month for the first time in a year.
• Valeant Pharmaceuticals International Inc stock dives after profit misses estimates, forecast cut (Financial Post) Valeant Pharmaceuticals International Inc. cut its 2016 profit forecast as new Chief Executive Officer Joseph Papa starts his attempt to turn around the embattled drugmaker. The shares plummeted in early trading. Earnings will be US$6.60 to US$7 a share, excluding some items, the company said in a statement Tuesday. In March, under former CEO Michael Pearson, Valeant anticipated US$8.50 to US$9.50. Analysts were predicting earnings of US$8.49, the average of estimates compiled by Bloomberg. In the first quarter, earnings of US$1.27 missed analysts’ predictions by 10 cents

 Overnight markets 

• Overview: US 10yr note futures are up 0.0358% at 130-30, S&P 500 futures are up 0.12% at 2110.75, Crude oil futures are up 1.05% at $50.21, Gold futures are down -0.63% at $1239.6, DXY is up 0.03% at 93.934.

 US Economic Data 

• 8:30 AM: Nonfarm Productivity, 1Q F, -0.6%, est. -0.6% (prior -1.0%)
  •  Unit Labor Costs, 1Q F, 4.5%, est. 4.0% (prior 4.1%
• 10:00 AM: IBD/TIPP Economic Optimism Index, June, est. 48.2 (prior 48.7)
• 15:00 AM: Consumer Credit, April, est.  $ 18.0b (prior $ 29.674b)

Canadian Economic Data 

• 10:00 AM : Ivey Purchasing Managers Index, May, est. 51.0 (prior 53.1)

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

Tsys opening lower/flatter, some p/t after Friday’s 8-11 bp rally, US 10Y 1.725 (+2.2bps). German govt bonds slightly lower, UK gilt curve steeper, GBP at three-week low after TNS UK poll showed majority wanting to leave the EU. EU periph spds wider, 10Y Italy +5bps after Brexit polls.  Yellen speaks at 2:00PM and it will be interesting to see if she still views a rate hike as appropriate “in the coming months” in the wake of Friday’s incredibly weak non-farm print.  Commodities higher, WTI up over 1% close to $50. GOCs lower in line with tsys, provi spds unch after widening 2.5bps Fri. Still 10Y Ont spds actually ended the week 1bp lower despite 15bp rally in GOCs & decent supply.

News headlines

• Commodities Rise With Emerging Markets on Fed View; Pound Drops (Bloomberg) Miners and energy companies rallied with commodities after U.S. jobs data crushed speculation the Federal Reserve would raise interest rates this month. The pound slumped following polls that showed Britons favor exiting the European Union. Materials producers were the biggest gainers in both Europe and Asia as the Bloomberg Commodity Index headed for the highest close since October, with Brent crude above $50 a barrel and zinc extending its longest rally since 2013. Indonesia’s rupiah and Malaysia’s ringgit were the best performers among 31 major currencies after Friday’s U.S. payrolls report caused the Bloomberg Dollar Spot Index to tumble. The pound sank to a three-week low and Brexit concern also infected Spanish and Italian bonds and U.K. homebuilders, while boosting the Swiss franc.
• Yellen faces fine balance on Fed rate hike after job growth tumbles (Reuters) Federal Reserve Chair Janet Yellen will likely keep the door open to an interest rate hike within the next few months when she speaks on Monday, while striking a balanced tone about recently disappointing jobs growth and mixed signals in the U.S. economy. Yellen’s speech to the World Affairs Council of Philadelphia at 12:30 p.m. ET (1630 GMT) will address the economy and monetary policy, and is the last public comment by U.S. central bankers before their June 14-15 meeting.
• Oil Advances as Abu Dhabi Sees $60 Crude on Shrinking Surplus (Bloomberg) Oil advanced as Abu Dhabi forecast prices could climb as high as $60 a barrel amid a glut that’s dwindling more quickly than projected. Futures rose as much as 1.3 percent in New York. The global surplus is down to 1.2 million to 1.5 million barrels a day and has contracted faster than expected, Ali Majed Al Mansoori, chairman of the Abu Dhabi Department of Economic Development, said in a Bloomberg Television interview.
• German Factory Orders Declined in April on Weak Export Demand (Bloomberg) German factory orders declined in April as demand for investment goods from outside the 19-nation currency region slumped. Orders, adjusted for seasonal swings and inflation, fell 2 percent from the prior month, when they rose a revised 2.6 percent, data from the Economy Ministry in Berlin showed on Monday. The reading, which is typically volatile, compares with economists’ forecast for a drop of 0.5 percent. Orders slid 0.5 percent from a year earlier.
• China’s Debt Load Is (Much) Higher Than Previously Thought, Goldman Says (Bloomberg) Count total social financing (TSF) as another Chinese statistic of increasingly dubious value, according to analysts at Goldman Sachs Group Inc. With many investors grappling to understand the degree to which China’s economic growth has been fueled by debt, efforts to get a grip on measures of new credit creation have gained fresh urgency. To date many have relied on the TSF invented by the Chinese authorities in 2011 as a way of capturing a larger slice of the country’s shadow banking activity, but Goldman analysts led by MK Tang cast fresh doubt on the measure’s ability to gauge credit creation in a note published on Wednesday.
• Britain’s EU Out campaign takes 4-5 percentage point lead: YouGov and ICM polls (Reuters) The campaign for Britain to leave the European Union has taken a 4-5 percentage point lead ahead of a June 23 referendum, according to online polls by ICM and YouGov, sending sterling toward three-week lows against the U.S. dollar. The swing toward « Out » with less than three weeks to go comes as both sides step up their campaigning to try to win over the large number of still undecided voters with warnings over the economy and immigration.
• CPP should be expanded, but probably not for the reasons you think (Financial Post) June will be a critical month for public pensions with the finance ministers meeting to discuss expansion of the Canada Pension Plan. The battle lines have been drawn and a bigger CPP is either one of the biggest mistakes the country can make or a godsend that will rescue the middle class from a bleak existence in retirement. To gain some perspective on which of these competing visions is more plausible, it is useful to look back at the birth of the CPP in the mid-1960s.

Overnight markets 

• Overview: US 10yr note futures are down -0.1312% at 130-26, S&P 500 futures are up 0.25% at 2103, Crude oil futures are up 2.12% at $49.65, Gold futures are up 0.26% at $1246.1, DXY is up 0.08% at 94.105.

 US Economic Data 

• 10:00 AM: Labor Market Conditions Index Change, May,  est. -0.8% (prior -0.9%)

Canadian Economic Data 

• 10:00 AM: Bloomberg Nanos Confidence, June 3,  (prior 57.5)

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

Tsys sharply higher yields ~5bps lower after very weak non-farm payrolls, ten year yields back to the lower end of three month range @1.73%, the short end seeing good volume50% odds of a rate hike in July. Core Euro bonds higher led by 30Y bunds after the Bundesbank cut its forecast for growth and inflation, the latter from 1.1% to 0.2% for this year and 1.5% from 2.0% for 2017, even as the central bank described the economy as ‘fairly robust’. The German 10Y traded below 0.10% for the first time since April 8th following the release of much weaker than expected Eurozone retail sales for April (unch vs 0.4% exp). Provis opening 1-1.5bps wider, giving back gains from yest impressive rally, spds are still ~3bps lower on the week, all in yields the lowest in a year.

News headlines

• Stocks Upbeat Before Jobs Data as Crude Gains Boost Commodities (Bloomberg)  From stocks to commodities, financial markets are heading toward the monthly U.S. payrolls report with a relative sense of optimism. Shares rose in Europe and Asia after the S&P 500 Index closed at a seven-month high on Thursday. Commodities neared a bull market as Brent crude exceeded $50 a barrel, copper advanced and soybeans led crops higher. New Zealand’s dollar and Indonesia’s rupiah led gains among 31 major currencies.
• Brent crude oil holds above $50 on signs of rebalance (Reuters) Brent crude prices held around $50 a barrel on Friday on signs the market was moving back to more balanced supply and demand, and on an OPEC meeting viewed as supportive. « The worst was over, » Qatari energy minister Mohammed Al-Sada told reporters in Moscow. « The market is heading towards rebalancing. » The positive tone of the Organization of the Petroleum Exporting Countries (OPEC) meeting in Vienna on Thursday assuaged concerns over an intensified battle for market share between rivals Saudi Arabia and Iran.
• Commodities Stand on Brink of Bull Market After Oil’s Recovery (Bloomberg) Commodities are nearing bull-market territory after rebounding from the lowest level in at least 25 years as oil prices rallied, complementing advances in recent weeks in soybeans and zinc. The Bloomberg Commodity Index, which tracks returns from 22 raw materials, climbed 0.6 percent to 87.24 by 3:32 p.m. in Singapore on Friday. The gauge bottomed at a closing low of 72.88 in January, and a finish above 87.45 would mark a 20 percent advance, meeting the common definition of a bull market. The measure is still about 50 percent below the high reached in 2011.
• China May services growth cools to three-month low, hiring slows: Caixin PMI (Reuters) Growth in China’s services sector cooled to a three-month low in May as new business and hiring slowed, a private survey showed on Friday, echoing signs of fading momentum elsewhere in the economy. The Caixin/Markit services purchasing managers’ index (PMI) for May dropped to 51.2 from 51.8 in April. Readings above 50 indicate an expansion on a monthly basis, while readings below signal contraction.
• Fed likely to avoid rate hike before Britain votes on leaving EU (Reuters) The U.S. Federal Reserve may be forced to delay a rate hike at its June meeting because of mounting concern over the economic fallout from Britain’s vote on whether to leave the European Union. The geopolitical risk likely will push any rate increase until at least July, despite apparent consensus among Fed officials that a hike is warranted by stronger U.S. growth and tight labor markets. The Fed’s June 14-15 rate-setting meeting comes just a week before the British vote on June 23. A « leave » vote is expected to roil financial markets, cause credit spreads to widen, trigger a rush into safe assets and bolster the dollar.
• The G7 didn’t buy Trudeau’s big-deficit growth plan. Neither should we (Financial Post) Last week’s G7 meeting should give Prime Minister Trudeau ‎reason to reflect on his plan for deficit spending. He arrived in Japan determined to sell other leaders on the merits of budgetary deficits to grow the economy. But his peers weren’t buying. ‎The summit’s 14,000-word communiqué was silent on calls for more government spending. Why? Most of the other G7 leaders know that a “growth-friendly” agenda can’t be written in red ink. This is a powerful rejoinder to the Trudeau government’s plan to bolster the Canadian economy through deficit spending.
• Valeant gets another default notice from bondholders (Reuters) Troubled Canadian drugmaker Valeant Pharmaceuticals International Inc (VRX.TO) said it received another notice of default from bondholders for the delay in filing its first-quarter report. However, the company reiterated that it would file the report with U.S. and Canadian regulators on or before June 10, ahead of a July 31 deadline. Valeant has lost more than half its value since mid-March, after it said a delay in the filing of its annual report could put it at risk of a default on its borrowings.

Overnight markets 

• Overview: US 10yr note futures are up 0.7098% at 130-26, S&P 500 futures are down -0.44% at 2094.5, Crude oil futures are down -1.04% at $48.66, Gold futures are up 2.2% at $1239.3, DXY is down -1.04% at 94.571.                                                                                                                                     

US Economic Data 

• 8:30 AM: Change in Nonfarm Payrolls, May,  38k, est. 160k  (prior 160k, revised 123k)
  • Change in Manufacturing Payrolls, May, -10k, est. -2k  (prior 4k, revised 2k)
  • Unemployment Rate, May,  4.7%, est. 4.9% (prior 5.0%)
  • Average Hourly Earnings, m/m, 0.2%, est. 0.2% (prior 0.3%, revised 0.4%)
  • Average Hourly Earnings, m/m, 2.5%,  est. 2.5% (prior 2.5%)
• 9:45 AM:  Markit US Services PMI, May F, est. 51.4 (prior 51.2)
  • Markit US Composite PMI, May F, (prior 50.8)
• 10:00 AM:  ISM Non-Manf. Composite, May, est. 55.3 (prior 55.7)
  • Factory Orders, April,  est. 1.9% (prior 1.1%)

Canadian Economic Data 

• 8:30 AM : Labor Productivity, q/q, 1 Q, est. 0.4% (prior 0.1%)

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