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20/01/2016

by admin | Jan 20, 2016 | comments

Market update

US tsys trading sharply higher, flatter, US 10Y below 2.0% (1.97, -8.5bps) on ‘risk off’ with US stock futures lower, European equities -3.0%, crude down 3.0% below $28.00. IEA warned oil market could ‘drown in oversupply’ (see above). Tsys off the highs despite weaker 8:30 data including Dec Housing Starts -2.5%, CPI -0.1% vs 0.0% exp. Latest JPM Tsy Client Survey for Jan 19th revealed highest no. of shorts since Nov 23 of last year. In Canada, GOCs are higher, lagging the rally in tsys by ~1.5bps with the curve ~2bps flatter after stronger Nov Wholesale Sales/Man Sales &before BOC. Crude weakness may tip the Bank’s hand in cutting rates with odds ~60%. Provis 2 bps wider, Ont 46 120/119, Ont 25 109.5/108.5.

News headlines

Canadians’ household debt climbs to highest in G7 in world-beating borrowing spree (Financial Post) Canadian households are carrying the biggest debt to income loads in the Group of Seven, the federal budget watchdog says – and that burden is likely to get even heavier. Canadians have piled up the biggest increase in debt to income in the G7 since 2000, according to a new report by the Parliamentary Budget Officer, released Tuesday.
Bank of Canada’s Policy Flexibility Makes Rate Decision a Coin Flip (Bloomberg) Multiple threats to financial stability have made crystal balls cloudier this year. Uncertainty reigns ahead of tomorrow’s Bank of Canada interest rate decision. The implied odds of a rate cut according to financial markets stand at just over 50 percent, and private-sector economists are almost evenly divided on whether the nation’s central bank will cut its policy rate to a financial crisis low of 0.25 percent. But one thing’s for sure, says Avery Shenfeld, chief economist at CIBC World Markets: what the Bank of Canada will project as the headline inflation rate by the end of 2017. Canada Banks Unlikely to Fully Match Bank of Canada Cut: CIBC.
Poloz Arrives at Crossroads With Canada Recovery in Tatters (Bloomberg) Stephen Poloz is in a no-win situation.As the Bank of Canada governor prepares to release his interest rate decision, forecasters are about evenly split on whether he’ll cut the benchmark rate to 0.25 percent or leave it at 0.5 percent. A cut risks adding to an already epic currency slump and may do little for growth; standing pat gives the impression the central bank is cold to the widening damage from collapsing oil prices.
Global Stocks Slide on Oil Rout (Wall Street Journal) Global stocks resumed the year’s steep selloff Wednesday as oil prices sank to a 12-year low and resurgent concerns about global growth snapped a brief bout of gains in financial markets. Futures pointed to a 1.8% opening loss for the S&P 500. Changes in futures don’t necessarily reflect market moves after the opening bell. As shares across Asia and Europe fell, investors turned to perceived havens such as the yen, gold and U.S. Treasurys.
K. wage growth slowest since February even as unemployment falls again (Globe and Mail) Wage growth in Britain in the three months to November was its slowest since February, official data showed on Wednesday, the latest sign the Bank of England will take its time before raising interest rates.The slowing in wage growth came even as Britain’s unemployment rate unexpectedly fell to 5.1 per cent, its lowest since early 2006, from 5.2 per cent in the three months to October.
IMF says refugee influx could provide EU economic boost (TheGuardian) The recent influx of refugees into Europe is likely to raise economic growth slightly in the short term – mainly in Austria, Germanyand Sweden – and could deliver a bigger long-term economic boost to the EU if refugees are well integrated into the job market, according to the International Monetary Fund.3
Oil market could drown in oversupply in 2016, says IEA (TheGuardian) The world could find itself drowning in oil this year and prices could fall further as new Iranian output cancels out production cuts elsewhere, according to the International Energy An increase in supply and weakening demand growth will ensure there is an overabundance of oil until late 2016 at the earliest, the IEA said in its January report. It said the result would be the third successive year when supply exceeded demand by 1m barrels a day, and the system would struggle to cope.
Global unemployment to rise by 3.4 million in two years, report says (TheGuardian) International Labour Organization predicts joblessness will surpass 200 million by end of 2017 for the first time on record. More than 3 million people will become unemployed worldwide in the next two years, making existing jobs vulnerable and fuelling potential social unrest as the global economy slows, a report warns.The International Labour Organization predicts unemployment will rise by about 2.3 million this year to 199.4 million, and that 1.1 million will be added to the global count in 2017, taking joblessness to more than 200 million for the first time on record.

Overnight markets

Overview: US 10yr note futures are up +0.24% at 128-22, S&P 500 futures are down -1.45% at 1846.00, Crude oil futures are down -1.97% at 27.90$, Gold futures are up +1.17% at $1101.80, DXY is up +0.01% at 99.002.

US Economic Data

Mortgage applications grew 9% from one week earlier (previous +21.3% with purchase sub-index +17.8% and refi sub-index +23.8%),
Housing starts dipped 2.5 percent last month to a seasonally adjusted annual rate of 1.15 million homes. This follows a sharp 10.1 percent gain in November.
Building permits fell 2.9 percent in December to an annual rate of 1.23 million.
Consumer Price Index slipped 0.1 percent after being unchanged in November. Despite the drop last month, the CPI increased 0.7 percent in the 12 months through December, the biggest increase in a year.

Canadian Economic Data

Canada November wholesale trade sales +1.8% vs +0.5% expected. Prior was -1.1% (revised to -1.3%)
Canada Manufacturing Shipments (MoM) above expectations (0.5%) in November: Actual (1%)
The Bank of Canada will announce its decision on a key interest rate at 10am against a backdrop of low oil prices, a tumbling Canadian dollar and grim prospects for economic growth.

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
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

19/01/2016

by admin | Jan 19, 2016 | comments

Market update

US tsys trading lower after ‘risk on’ session after China GDP, which thou less than exp, exceeded some forecasts and left door open for further stimulus. US 10Y 2.055 (+1.5bps) vs 2.085 in early NA trading. Light data session so bonds likely to take cue from stocks esp in light of ongoing volatility, both BOA & MS beat Q4 earnings exp which should also support stocks. Euro stocks higher (+2.5%), crude up 0.75%,core Euro bonds lower with longs underperforming after better than exp German ZEW (59.7 vs 53.1). GOCs lower led by 10s, curve ~1.5bps steeper with longs well bid 10/30 ~1bp flatter. Provis 1bp tighter on no trade, Ont 46 117/116, Ont 25 106.5/106.

News headlines

C hina GDP Slows to Weakest Since 2009 on Manufacturing Slide (Bloomberg) China’s economy slowed in December, capping the weakest quarter of growth since the 2009 global recession, as the Communist leadership grapples with a transition to consumer-led expansion. Industrial production, retail sales and fixed-asset investment all slowed at the end of the year, while gross domestic product rose 6.8 percent in the fourth quarter from a year earlier. Full-year growth of 6.9 percent, the least since 1990, was in line with the government’s target of about 7 percent.
Oil rises on record Chinese demand, oversupply caps gains (Reuters) Oil prices rose more than 3 percent on Tuesday as data showed Chinese oil demand likely hit a record high in 2015, but contracts remained near 12-year lows as the IEA said the market should stay oversupplied this year. Iran has said it plans to increase oil production by 500,000 barrels a day now that sanctions have been lifted under a nuclear deal with world powers.
Euro zone inflation confirmed at 0.2 percent in December (Reuters) Euro zone inflation was confirmed at 0.2 percent in December, the European Union’s statistics office data showed on Tuesday, with prices going up in restaurants and cafes and falling the most for fuel. Eurostat confirmed its earlier estimate that consumer prices in the 19 countries sharing the euro were flat month-on-month in December for a 0.2 percent year-on-year rise. However, the statistics office revised down the inflation number for November to 0.1 percent year-on-year from 0.2 percent reported earlier.
François Hollande Aims 2 Billion Euro Plan at France’s Economic ‘Emergency’ (NYTimes) Declaring the French economy to be in a “state of emergency,” President François Hollande announced on Monday a 2 billion euro plan to subsidize job creation and temporarily move half a million unemployed people off the welfare rolls, as record unemployment threatens his bid for re-election next year.
IMF cuts global growth forecasts (TheGuardian) The Washington-based body said world output would be 0.2 points lower in 2016 and 2017 compared with forecasts made just three months ago – and that the risks to its predictions were to the downside.
A Hint of Trouble in European Debt (WSJ) A wave of selling has taken Europe’s corporate-bond market to levels typically seen during recessions, another indication that the turmoil in global markets could spread into the wider economy. The gap in yields, or spread, between Eurozone high-grade corporate debt and safer government bonds has ballooned to its widest level in nearly three years, according to Barclays bond indexes. Three years ago, the European economy was in recession following the sovereign-debt crisis that had engulfed the continent.
Fed Almost Certain to Keep Interest Rates Unchanged at Next Meeting (WSJ) Federal Reserve officials, facing an economic jumble as 2016 begins, will almost certainly keep short-term interest rates steady at a policy meeting this month and turn their focus toward a potential cliffhanger decision about whether to lift them when they gather again in March.
‘Currency instability’ now a serious concern for Canada (FinancialPost) Canada’s economy is being threatened by “currency instability” as the loonie’s rapid decline against the U.S. dollar is hurting business and consumer confidence, economists warn. The loonie fell last week below 70 cents against the U.S. dollar for the first time since 2003, with the currency trading at just under 69 cents on Monday.
Why the price of oil will recover faster than you think (FinancialPost) It no doubt feels like a new paradigm for oil investors with the price of oil failing 72 per cent since 2014, the second-largest peak-to-through decline in more than 30 years. Many are pointing fingers at the Organization of the Petroleum Exporting Countries for the monster wave of oil now hitting the markets, but it really all started with the U.S. shale producers.
German Jan ZEW Econ Expectations 10.2 Vs 16.1 in Dec German economic sentiment deteriorated at the start of the year, albeit less than forecast, as slower growth in China and problems in other large developing economies cloud Germany’s economic outlook, a survey of analysts and institutional investors showed Tuesday. The ZEW indicator of economic expectations fell to 10.2 in January from 16.1 in December, its lowest level since October last year. Economists polled by The Wall Street Journal had forecast a decline to 8.0.

Overnight markets

Overview: US 10yr note futures are down -0.16% at 128-08, S&P 500 futures are up +1.19% at 1897.50, Crude oil futures are up +0.68% at 29.62$, Gold futures are down -0.50% at $1085.20, DXY is up +0.33% at 99.286.

US Economic Data

NAHB Housing Market Index will be released at 10am
Net Long-term TIC Flows at 4pm from the US Treasury

Canadian Economic Data

Foreign investment in Canadian securities continued in November, at a net $2.58-billion, though that amount was dwarfed by October’s $19.08-billion, which was revised sharply down from $22.08-billion.

Disclosure and Disclaimer

Ivan Greenstein, Stephan Buu
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

Tel : (514)-861-0240
Fax: (514)-861-3230

15/01/2016

by admin | Jan 15, 2016 | comments

Market update

US tsys sharply higher, 10Y below 2.0%(-8bps) for the first time since Oct 16th after Jan Empire Man fell to lowest since June 2009 (new orders -23.5 vs -6 in Dec). China & oil main themes o/n with brent below $30 o/n while the China CSI 300 fell 3.0%. Core Retail sales also weak (-0.1% vs 0.2% exp) while PPI came in as exp. Fed Dudley to speak@ 9:00 on the economy and mon policy. Core Euro bonds higher, German 10Y bund lagging the rally in tsys – -4bps @ 0.53%, the DAX -2.4% close to Sep lows. GOCs are higher, lagging the move in tsys ~4bps thru the curve longs particularly heavy all week – 10/30 now 85 bps + 2bps , 8bps wider on the week with 2/10 unch!, so longs start to look interesting here.

News headlines

Charting the Markets: Global Stocks Suffer From China’s Bear Market (Bloomberg) Global stocks are heading for their third consecutive weekly decline. Some $5.6 trillion has been wiped off the value of equities around the world in 2016. The MSCI All Country World Index is hovering above its lowest close since September 2013 as concern persists about the health of China’s economy, while the price of crude oil languishes at 12-year lows. Asian stocks sank to a three-year low, and the Stoxx Europe 600 Index dropped to its lowest since January 2015.
China’s Banks Scaled Back Lending in December (Bloomberg) China’s new bank loans came in lower than expected in December, as lenders sharply scaled back activity at the end of the year amid slowing economic growth and rising bad debt. However a broader measurement of credit that also includes nonbank lending showed a surprise rise, offsetting some of the impact from the retreat of state lenders, which have long been a major lever for Beijing to help lift the world’s second-largest economy.
Oil slides below $30 on oversupply fears (FT) Oil resumed its seemingly inexorable slide on Friday with prices on both sides of the Atlantic slipping below $30 a barrel as investors braced for the full return of Iranian barrels to the market.
Oil Seen Heading to $20 by Morgan Stanley on Dollar Strength (Bloomberg) A rapid appreciation of the U.S. dollar may send Brent oil to as low as $20 a barrel, according to Morgan Stanley.Oil is particularly leveraged to the dollar and may fall between 10 to 25 percent if the currency gains 5 percent, Morgan Stanley analysts including Adam Longson said in a research note dated Jan. 11.
Canadian dollar dips below 69 cents US, pressured by oil prices (TheGlobeandMail) The Canadian dollar was trading below 69 cents US early Friday for the first time since 2003 as crude oil futures dropped below $30 US a barrel. The loonie traded as low as 68.74 cents US about five hours before the Toronto Stock Exchange opened. It was somewhat higher at 6:30 a.m. ET, trading at 68.98 cents US — about two-thirds of a U.S. cent below the Thursday closing price.
Big five US investment banks hurt by China and oil (FT) Wall Street banks are poised to unveil another batch of lacklustre profits after the run-up to the Federal Reserve’s historic interest rate rise failed to boost their crucial trading businesses.
US equity funds hit by outflows for second straight week (FT) Investors pulled billions of dollars from US equity funds for the second straight week as fears of a slowdown in China continued to reverberate through global financial markets.The pace of withdrawals accelerated to $12.4bn in the week to January 13, with stock funds suffering the largest two-week period of redemptions in 10 months, according to fund flows tracked by EP.
Goldman Sachs agrees to tentative $5.1B mortgage settlement (USAToday) Goldman Sachs Group (GS) has reached a nearly $5.1 billion tentative settlement of a federal and state investigation of the investment banking giant’s handling of mortgage-backed securities before the national financial crisis, the bank said Thursday. The New York City-based bank will pay a $2.4 billion civil monetary penalty, make $875 million in cash payments and provide $1.8 billion in consumer relief — including mortgage principal forgiveness for underwater homeowners and distressed borrowers, forecloseure prevention, support for debt restructuring and other programs.
BHP Billiton takes $7 billion hit from U.S. oil business (CNNMoney) BHP Billiton announced a “disappointing” $7.2 billion pre-tax writedown on its U.S. oil and gas assets, following a slump in prices. The Anglo-Australian mining company said it was reducing the number of rigs in its onshore U.S. business to five, from seven currently. Just a year ago it was operating 26 rigs in the U.S. The company also said it will review its investment and development plans for the rest of the 2016 financial year.
Citigroup Earnings Jump on Lower Legal Fees, Higher Revenue (WSJ) Citigroup Inc. said Friday that fourth-quarter profit jumped as legal costs fell and revenue rose at the third-largest U.S. bank by assets. The New York-based bank reported a profit of $3.34 billion, or $1.02 per share. That compares with the $344 million, or 6 cents per share, it reported in the same period of 2014. Revenue edged up 3%, to $18.46 billion from $17.9 billion a year ago. After stripping out accounting adjustments, earnings were $1.06 per share. That edged past the $1.05 expected by analysts polled by Thomson Reuters. Adjusted revenue was $18.64 billion, beating analysts’ expectations of $17.9 billion.
Wells Fargo Reports Stable Profit on Slight Rise in Revenue (WSJ) Wells Fargo & Co. said its fourth-quarter profit was flat compared with the year-ago period, as the nation’s fourth-largest bank by assets continued to wrestle with a slump in oil prices. The San Francisco-based bank reported a profit of $5.71 billion, or $1.03 a share. That compares with $5.71 billion, or $1.02 a share, in the same period of 2014. Analysts polled by Thomson Reuters had expected earnings of $1.02 a share. Revenue rose to $21.6 billion from $21.4 billion. Analysts had expected $21.8 billion.
Canadian Oil Sands claims victory, calls for Suncor to disclose details to public (TheGlobeandMail) Canadian Oil Sands Ltd. is calling on Suncor Energy Inc. to disclose details of how shareholders reacted to its $4.3-billion hostile takeover bid for COS before a Jan. 8 deadline was extended by nearly three weeks.

Overnight markets

Overview: US 10yr note futures are up +0.66% at 128-22, S&P 500 futures are down -2.45% at 1867.75, Crude oil futures are down -4.74% at 29.72$, Gold futures are up +1.86% at $1093.90, DXY is down -0.48% at 98.611.

US Economic Data

Retail sales dipped a seasonally adjusted 0.1% last month to $448.1 billion after having climbed a 0.4% in Nov.
Retail sales excluding automobiles, gasoline, building materials and food services fell 0.3% after a downwardly revised 0.5% rise the prior month.
Core retail sales previously were reported to have advanced 0.6%. Economists had forecast 0.3% increase last month.
Producer prices slipped 0.2% after increasing 0.3% in Nov. Economists had forecast PPI falling 0.2%, 1.0% y/y.
Empire Man fell sharply in Jan plummeting to -19.4 from -6.2 in Dec and -4 exp. This is the lowest reading since 2009 driven by a collapse in new orders to -23.5 from -6.2 while shipments also contracted a lot (-14.4 vs. 4.6 prior).
Industrial Production fell 0.4% in Dec. vs 0.2% est, while capacity utilization dropped to 76.8% from 77%.

Canadian Economic Data