Commentaires

Market update

US tsys trading lower, curve steeper on avg volume in TY futs, US 10Y 1.755 (+3bps). DXY index lower except vs vs Yen on more talk from Jap officials warning of Yen overvaluation. Equities mixed – Nikkei higher, European stocks higher on financials on speculation of Italian bank rescue fund. Core euro bonds lower, steeper , 10Y bunds lower for a 3rd day – 1Y bund down ~$1.00 after reaching new high yest 164.60 in European trading. Bunds also pressured from European sov supply from Neth, France & Ger. GOCs lower, spds slightly wider vs tsys  – crude higher again $40.80. Provis unch after closing 1bp tighter yest – BC/Alberta under pressure Alb/Ont46 12/11 from 11/10 on Fri.

News headlines

• Stocks Rise Around World as Commodities Advance; Bonds, Yen Drop (Bloomberg) Stocks rose with commodities, while the yen slipped and government bonds fell as crude oil’s advance above $40 a barrel boosted economic optimism. The MSCI All-Country World Index advanced for a third-straight day and Russia’s ruble joined the Australian dollar among the best-performing currencies. Metals prices jumped, helping push the Bloomberg Commodity Index to the highest this month. The yen fell versus all its major peers and German bund yields climbed the most in a month as demand for haven assets ebbed. Faster inflation boosted the pound and Sweden’s krona.
• Bond Traders Show Skepticism of Goldman’s Forecast for Fed Hikes (Bloomberg) Bond traders are betting the odds of a Federal Reserve interest-rate increase this year are less than a coin toss, clashing with Goldman Sachs Group Inc.’s call for three moves. Futures contracts indicate there’s about a 48 percent chance the Fed will follow its December rate increase with one more in 2016. The figure has plunged from more than 90 percent at the end of 2015 as Fed Chair Janet Yellen and other officials warned that heightened risks in the global economy are reason for the U.S. central bank to delay tightening policy.
• UK inflation rises to 0.5% on early Easter travel costs (TheGuardian) Inflation jumped to 0.5% in the year to March after a rise in the cost of air fares over Easter and more expensive spring and summer clothing ranges hitting stores. The higher cost of booking a hotel and restaurant table also pushed inflation beyond the 0.3% seen in February, according to official figures. The higher cost of booking a hotel and restaurant table also pushed inflation beyond the 0.3% seen in February, according to official figures.
• China No Longer Epicenter of Volatility to Brokers’ Dismay (Bloomberg) China’s investors are finally getting a chance to catch their breath. After turmoil in the past year rattled global money managers and undermined confidence in the Communist Party’s grip on the nation’s financial markets, gauges of volatility in the benchmark equity index and the yuan have fallen to the lowest levels since at least November. While increasing stability can be seen as a victory for the authorities, and a relief for international investors now fixated on turbulence in Japanese markets and the upcoming U.S. earnings season, muted price swings aren’t translating into better trading conditions for local brokers amid suspected intervention by state-backed funds.
• China says tax reform will boost economy, structural changes (Reuters) China’s value-added tax reforms will help support the economy and speed up structural adjustments, Vice Finance Minister Shi Yaobin said on Tuesday, playing down concerns such reforms could fan property speculation. China will replace a business tax with a value-added tax in its construction, real estate, financial and consumer services sectors, effective from May 1, and the government hopes to cut taxes by more than 500 billion yuan ($77.32 billion) in 2016.
• Russia 2016 budget gap may hit 4 percent GDP if oil at current prices (Reuters) Russian Finance Minister Anton Siluanov said on Tuesday that the budget deficit could reach 4 percent of gross domestic product this year if oil prices stayed at current levels. « The task we are setting for ourselves is to have a budget deficit at 3 percent of GDP under (an oil price of) $40 (per barrel), » he told an economic conference. « If the oil price is as it’s shaping up now – $32-33 – accordingly, it (budget deficit) will be up to 4 percent of GDP, » Siluanov said.
• Gloomy start to results season hits shares (Reuters) A downbeat first batch of corporate results prodded European stock markets lower on Tuesday while oil prices held above $40 ahead of a meeting of major producers to discuss freezing output. The mood among investors in Europe and the United States has been subdued in the run-up to the second quarter earnings season, and sales numbers from France-based luxury goods producer LVMH were poor, helping push European markets 0.3 percent lower in early trade.
• Goldman Sachs to pay $5 billion in U.S. Justice Department mortgage bond pact (Reuters) Goldman Sachs Group Inc (GS.N) has agreed to pay $5.06 billion to settle claims that it misled mortgage bond investors during the financial crisis, the U.S. Department of Justice said on Monday. The settlement, which Goldman disclosed in January, stems from the firm’s conduct in packaging, securitization, marketing and sale of residential mortgage-backed securities between 2005 and 2007, the Justice Department said.
• Scotiabank boosts target on National Bank as capital position concerns diminish (Financial Post) Scotiabank has raised its target on National Bank shares to $44 from $42 because of diminished concern over the bank’s capital position. In a note to clients Monday, analyst Sumit Malhotra said “favourable macro movements” so far in fiscal 2016 should help Canada’s National Bank, which has consistently operated with capital ratios at the low end of the Big Six. In particular, the report said a combination of narrowing provincial bond spreads and a six per cent surge in the Canadian dollar should help the bank post a key CET1 ratio approaching 10 per cent in the second quarter.
• S. small business confidence hits new two-year low (Reuters) U.S. small business confidence fell to a fresh two-year low in March amid persistent worries about sales and profits, the latest indication that economic growth braked sharply in the first quarter. The National Federation of Independent Business (NFIB) said on Tuesday its small business optimism index dipped 0.3 point to a reading of 92.6 last month, the lowest since February 2014.
• Oil bust leaves energy industry, real-estate sector locked in battle over empty oilfield worker camps (Financial Post) A no trespassing sign collects dust next to an empty, chained-off parking lot for an equally empty work camp in the heart of North Dakota oil country. The sign and limp chain haven’t kept curious locals from trying to get a closer look at the Black Gold camp – a few brave ones have confessed on condition of anonymity to looking in the windows and scurrying through the vacant halls.
• Wells Fargo Misjudged the Risks of Energy Financing (Bloomberg) At its annual investor conference in San Francisco in May 2014, with oil trading at $102 a barrel, Wells Fargo & Co. boasted that in just two years it had almost doubled its energy exposure and seized the title of Wall Street’s top oil and gas banker. The timing couldn’t have been worse. Crude prices peaked a month later and have since plummeted to $40. Wells Fargo has downgraded 38 percent of its energy loans and set aside $1.2 billion to cover potential losses, according to company filings. The loans are coming under increasing scrutiny from regulators and investors, even though they make up only 2 percent of the bank’s portfolio.

Overnight markets

• Overview: US 10yr note futures are down -0.1789% at 130-26, S&P 500 futures are up 0.15% at 2037.5, Crude oil futures are up 0.97% at $40.75, Gold futures are up 0.44% at $1263.5, DXY is up 0.05% at 94.

US Economic Data

• NFIB Small Business Optimism number came in at a level of 92.6, weaker than expected.
• Import Price Index MoM growth was 0.2%, weaker than expected and up from prior month.
• Monthly Budget Statement will be released at 2:00 PM. 

Canadian Economic Data 

• There is no major economic data release 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, steeper on low volume, US 10Y 1.742 (+2bps). USD mixed – falling to new seventeen month low vs the Yen, US equity futures up slightly while European equities higher led by financials (~2.0%) on news of possible Italian bank rescue fund. Core Euro bonds lower led by 10Y gilts. German bunds lower, 3bps steeper on news of possible rescue fund being set up to help Italian banks. GOCs trading lower led by 2.5bps under perf by 10s on the curve, on top of the 5bp cheapening on Friday in post empl flattening. Provis unch , Quebec 10Y global in the works according to IFR.

News headlines

• European Stocks Rise Led by Italian Banks; Emerging Markets Gain (Bloomberg) European equities rose as Italian banks climbed before a meeting to discuss cleaning up the financial system. Emerging markets advanced after signs of a pick-up in Chinese industrial demand, while the Swiss franc weakened with government bonds. The Stoxx Europe 600 Index extended Friday’s gains, putting it on course for the biggest back-to-back advance since March, and futures on U.S. stock indexes were also higher.
• Oil price dips on prospects for producers’ meeting (Reuters) Oil prices slipped on Monday over worries that the result of next Sunday’s meeting of producers in Qatar aimed at freezing current output levels would fail to improve the current supply-demand balance. Brent crude futures, the global benchmark, were down 27 cents at $41.67 a barrel at 0810 GMT, retreating from a three-week high reached on Friday. Oil prices rallied more than 6 percent last week after data showed U.S. energy firms had cut oil rigs for a third straight week to the lowest since November 2009.
• Negative Interest Rates Benefit the Global Economy, Says IMF Chief Christine Lagarde (WSJ) Subzero interest rates in Europe and Japan are “net positives” for the global economy, International Monetary Fund chief Christine Lagarde said Tuesday, though she warned that the side effects of unorthodox central-bank policies should be closely monitored. Speaking ahead of the IMF’s Spring meetings in Washington, D.C., next week, Ms. Lagarde praised recent policy moves by the European Central Bank and the U.S. Federal Reserve, and called on governments to play their part by introducing growth-friendly reforms.
• Italy Production Declines, Adding To Doubts on Pace of Recovery (Bloomberg) Italian industrial production fell in February, reflecting concerns about the pace of recovery that prompted the government to cut this year’s growth outlook. Output declined 0.6 percent from January, which registered a 1.7 percent revised jump, national statistics bureau Istat said in a report issued Monday in Rome. The median of 15 estimates in a Bloomberg survey called for a 0.9 percent drop in the February. On an annual, work-day-adjusted basis, production increased 1.2 percent, Istat said.
• Carney’s `Brexit’ Headache Worsens With Rate Outlook Schism (Bloomberg) Mark Carney could face a challenge in just over two months, regardless of whether Britons choose to stay in or quit the European Union. While the Bank of England governor has signaled a slow tightening path, and investors see no rate increase for years, a vote to stay in the EU on June 23 potentially creates a whole new backdrop. With ‘Brexit’ risk removed, markets could pull in bets for a hike, generating a new communication hurdle for the Monetary Policy Committee, which holds its monthly meeting this week.
• Fed’s Inflation Push Finally Has Bond Traders Wanting to Believe (Bloomberg) When it comes to inflation, bond traders are finally starting to listen to the Federal Reserve. After trying, and failing, to convince investors the steep drop-off in inflation in the past year was just a short-term blip, the Fed is now winning them over. Since mid-February, the outlook for consumer-price gains has soared from post-crisis lows as oil rebounds and Chair Janet Yellen signals a willingness to let the U.S. economy run hot before raising interest rates again. By one measure, market expectations rose last month by the most since 2011.
• Tokyo warns again on yen strength (Reuters) Some cautious gains for European stock markets hauled the yen down off a 17-month high against the dollar on Monday after Japanese officials warned again that they could intervene against the currency’s « one-sided » rally. Chief Cabinet Secretary Yoshihide Suga said the Group of 20’s agreement to avoid competitive devaluations did not mean Japan cannot intervene against currency moves, repeating language which has flagged intervention in the past.
• S. shale oil firms feel credit squeeze as banks grow cautious (Reuters) Nearly two years into an epic oil rout, U.S. shale drillers that have upended global energy markets are finally feeling a credit squeeze as banks make their biggest cuts yet to their loans. Every six months, oil and gas producers and their banks negotiate how much credit they should be given based on the value of their reserves in the ground. In previous reviews, banks were willing to offer borrowers some leeway, encouraged by producers’ hedges against falling prices and their ability to keep cutting costs in step with crude’s slide that began in mid-2014.
• Tsipras demonizes IMF to rally troops for bailout sacrifices (Reuters) In Athens, walls have ears. The leaking of a conference call of International Monetary Fund officials on Greece’s latest bailout review has further undermined mutual trust in fraught debt talks, embarrassed the European Commission and infuriated the IMF and Germany. At stake are the IMF’s reputation as a stern enforcer of financial rescue programs meant to make indebted states viable and the European Union’s determination to hold the euro zone together and avert another damaging Greek crisis.
• Wells Fargo admits deception in $1.2 billion U.S. mortgage accord (Reuters) Wells Fargo & Co (WFC.N) admitted to deceiving the U.S. government into insuring thousands of risky mortgages, as it formally reached a record $1.2 billion settlement of a U.S. Department of Justice lawsuit. The settlement with Wells Fargo, the largest U.S. mortgage lender and third-largest U.S. bank by assets, was filed on Friday in Manhattan federal court. It also resolves claims against Kurt Lofrano, a former Wells Fargo vice president.
• S. banks’ dismal first quarter may spell trouble for 2016 (Reuters) It is only April, but some on Wall Street are already predicting a rotten 2016 for U.S. banks. Analysts say it has been the worst start to the year since the financial crisis in 2007-2008 and expect poor first-quarter results when reporting begins this week. Concerns about economic growth in China, the impact of persistently low oil prices on the energy sector, and near-zero interest rates are weighing on capital markets activity as well as loan growth.
• Bill Gross sees one or two Fed rate hikes in 2016: Barron’s (Reuters) Bond manager Bill Gross predicts that the U.S. Federal Reserve will raise interest rates once or twice in 2016, according to an interview in Barron’s. Gross, who is the manager of the Janus Global Unconstrained Bond Fund (JUCAX.O), told Barron’s that he does not expect U.S. Treasury yields, which are currently around 1.7 percent, to change dramatically this year.

Overnight markets 

• Overview: US 10yr note futures are down -0.0954% at 130-29, S&P 500 futures are up 0.43% at 2049.5, Crude oil futures are up 0.81% at $40.04, Gold futures are up 0.85% at $1254.4, DXY is down -0.26% at 93.993.                     

US Economic Data 

• There is no major economic data for today 

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 opening weaker on low volume in tsy futs, US 10Y 1.72 (+3bps) as European equities rise, Nikkei up for second day and crude sharply higher (3.8%). Core Euro bonds lower/ steeper, 10Y bund yield 3bps higher on ‘risk on’ and better than exp rise in German exports. JPY lower for the first time in six days, BOJ member saying rapid moves in Yen undesirable. GOCs lower as 10s are +5bps on the curve after March employment came in at 40.6K vs 10K exp – almost entirely on rise in full-time (35K)  with the unemployment rate flaling to 7.1% from 7.3%. Provis better bid (0.5bps) after 8:30 data – Ont 26 98.5/98, Ont 46 109/108, QC 48 112.5/111.5.

News headlines

• Stocks up as investors look to end bruising week on a high (Reuters) Stocks and bond yields rebounded on Friday but were still firmly on track to end lower over the course of a bruising and volatile week marked by the Japanese yen’s surge against the dollar. Europe’s FTSEurofirst 300 .FTEU3 was up 0.7 percent in early trading, lifted by energy shares thanks to a sharp rise in crude oil prices, but will likely notch up its fourth straight weekly decline. That would be its longest losing streak since October 2014.
• Yen stalls as finance minister warns on intervention (Reuters) Gains for stock markets and a warning of possible intervention from Japan’s finance minister knocked back the yen on Friday after a week of startling gains. The yen surged at one point by as much as 2 percent against the dollar on Thursday, and Minister Taro Aso responded early on Friday by warning rapid currency moves were « undesirable, » that the yen’s were « one-sided » and that Japan would take steps as needed.
• Oil prices rise on optimism over end of punishing glut (Reuters) Oil prices rose on Friday, lifted by fresh hopes over a proposed freeze in oil production and firm economic indicators from the United States and Germany that cast a positive light on growth in fuel demand. Russia’s oil production could fall in April, sources said, while the country’s energy minister expressed hopes that producer nations could agree to an output freeze at a meeting in Doha later this month. Front-month U.S. West Texas Intermediate (WTI) crude futures were trading $1.33 higher at $38.59 per barrel at 0954 GMT, more than 3 percent above their last close. International Brent futures were up $1.30 at $40.73 a barrel.
• Treasuries Set for Two-Week Gain; Greenspan Warns of Global Risk (Bloomberg) Treasuries headed for their biggest two-week gain since January as the Federal Reserve warned the global economy presents heightened risks. U.S. government securities have returned 1.3 percent in the period, the biggest back-to-back weekly run since the period ended Jan. 15, based on Bloomberg World Bond Indexes. The Japanese yen has surged 11 percent this year, the most among the 16 most-traded currencies against the dollar, highlighting demand for perceived haven assets.
• Yellen, alongside Fed alum, says rate hikes on track (Reuters) The U.S. economy is on a solid course with some hints of inflation so the Federal Reserve is on track for further interest rate hikes, Federal Reserve Chair Janet Yellen said on Thursday in a defense of her decision to tighten policy late last year. In a rare spectacle, Yellen spoke on a New York panel alongside her three predecessors who ran the world’s most powerful central bank. She said that, seven years after the brutal financial crisis, the U.S. labor market was now « close » to full strength, again arguing that inflation would not be held down much longer by the strong dollar and low oil prices.
• China says G20 summit should be about economics, not politics (Reuters) The G20 summit to be hosted by China this year should be about economics and not political issues like territorial disputes, China’s foreign minister said on Friday, firing a warning shot ahead of the country’s biggest diplomatic event of the year. The summit, expected to be held in early September in the eastern Chinese city of Hangzhou, will gather major world leaders together like Chinese President Xi Jinping and U.S. President Barack Obama.
• Cameron Accused of Hypocrisy for Stake in Father’s Offshore Fund (Bloomberg) U.K. Prime Minister David Cameron was accused of “hypocrisy” after he said he held a stake in an offshore fund set up by his late father until six years ago, an admission broadcast on national television following four days of questions over the investment. The premier gave in to intense pressure to give details of his interests in the Blairmore Holdings Inc. fund after it was mentioned in reports that emerged Sunday following the leak of millions of documents from a Panamanian law firm detailing attempts to avoid tax.
• U.S. says China internet censorship a burden for businesses (Reuters) The United States has labeled China’s internet censorship a trade barrier in a report for the first time since 2013, saying worsening online restrictions are damaging the business of U.S. companies. Since Xi Jinping became China’s president that year, the U.S. had not listed China’s so-called Great Firewall as a trade impediment despite widespread outcry that the online blocks limit access to crucial information, email and search services such as those found on Google’s platform.
• Bond Managers Beware! Index Funds Are Coming for Your Money, Too (Bloomberg) If you’re a bond manager, you may think index funds are the headache of your stock-picking colleagues. Think again. U.S. managers tracking indexes oversaw a record 27 percent of the money in taxable-bond mutual funds and exchange-traded funds as of Feb. 29, compared with 20 percent at the end of 2013, according to Morningstar Inc. While the proportion is smaller than the roughly 40 percent of equity-fund assets in passive products, the trend and the reasons — cost savings and a poor performance of active managers on average — are similar.
• Foreign money is flowing into Canadian condominiums, raising concerns about market vulnerability (Financial Post) Fresh data on foreign ownership of condominiums in Toronto from Canada Mortgage and Housing Corp. points to an upswing in offshore money making its way into the country’s largest city. For the first time, the Crown corporation broke down offshore investment by the age of the buildings and it’s becoming increasingly clear that, as every new high-rise condominium goes up, so does the percentage of foreign owners.
• Greek consumer prices fall 0.7 pct y/y in March, back in deflation (Reuters) April 8 Greece’s annual EU-harmonised inflation rate turned negative in March after a positive reading in February, statistics service data showed on Friday. The reading in March was -0.7 percent after 0.1 percent in February. Consumer prices were led lower by apparel, footwear, housing, durable goods and transportation costs.  Economists polled by Reuters were expecting a zero EU-harmonised inflation rate in March.

Overnight markets 

• Overview: US 10yr note futures are down -0.2381% at 130-30, S&P 500 futures are up 0.82% at 2051.75, Crude oil futures are up 5.15% at $39.18, Gold futures are down -0.26% at $1234.3, DXY is up 0.05% at 94.526.

 US Economic Data 

• Wholesale Inventories MoM variation will be released at 10:00 AM

 Canadian Economic Data 

• Housing start number came in at a level of 204.3k, stronger than expected and down from prior month
• Unemployment Rate percentage is 7.1%, much stronger than expected, and down 0.2% from prior month
• Net Change in Employment number came in at a level of 40.6k, much stronger than expected and up from prior month

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