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Market update

US tsys opening higher, US 10Y 2.20 (-2.3bps) as Euro stocks down 1.4%, Nikkei off 2.0% after disappointment with latest BOJ easing (see above). Core Euro bonds higher,  10Y bund/tsy spd 3bps wider. GOCs higher, outperforming tsys by 2bps on much weaker than exp CPI (core -0.3% vs unch exp), CAD above 1.40 for the first time since 2004. Provis trading down Ont 46s 109/108.5 1.5bps wider on risk off – supply still poss today.

News headlines

• Dollar plunges against yen after Bank of Japan’s surprise easing move (Marketwatch) The dollar fell sharply against the yen on Friday as investors ultimately expressed disappointment in additional easing measures by the Bank of Japan, with the expectation that more must be done.

• Withdrawals hit US corporate bond funds (FT) Investment grade bond funds in the US have been hit with a record wave of redemptions, a week after two high-yield funds announced they would shutter and another barred withdrawals as the credit market showed further cracks.

• Fed Hikes, but Some Rates Veer Lower (WSJ) On the day the Federal Reserve implemented its plan to raise interest rates, driving up overnight borrowing costs, broader market forces conspired instead to drive other U.S. interest rates down.

• Japanese Stocks Whipsaw After BOJ Unveils New ETF Buying Program (Bloomberg) Japanese stocks whipsawed as investors digested a Bank of Japan announcement that it will establish a new program for purchases of exchange-traded funds. The Topix index jumped as much as 2 percent after the announcement, before resuming losses to be down 1.8 percent to 1,537.10 at the close in Tokyo, to cap a 0.8 percent weekly loss. The Nikkei 225 Stock Average slipped 1.9 percent to 18,986.80. The BOJ said a new ETF purchase program will have an annual budget of 300 billion yen ($2.5 billion) to offset any market impact as it resumes selling stock holdings in April. It will also extend the maturity of Japanese government bond holdings, it said in Tokyo.

• China Home-Price Increase Spreads to More Cities (Bloomberg) China’s home-price recovery spread to more cities in November, especially smaller ones, after Chinese authorities rolled out easing measures targeting regions with a surplus of unsold homes. New-home prices increased in 33 cities among the 70 cities tracked by the government, compared with 27 in October, the National Bureau of Statistics said Friday. Prices dropped in 27 cities, compared with 33 in October, and were unchanged in 10.

• Ukraine Defaults on $3 Billion Bond to Russia (Bloomberg) Ukraine said it won’t repay $3 billion in bonds due to Russia, moving a step closer to a court battle amid a new wave of economic tension between the two ex-Soviet neighbors.

• Canadian dollar tumbles to close below 72 cents US (CBC News) The Canadian dollar continued its slide today, closing below the 72-cent US mark for the first time since the spring of 2004. The loonie ended the trading day at 71.68 cents US, down more than four-fifths of a cent from its close Wednesday. At one point during the day, it was down more than a full cent.

Overnight markets

• Overview: IG25 5Y 94.486/95.111 (+0.380), US 10yr note futures are up +0.28% at 126-15+, S&P 500 futures are down -0.26% at 2019.50, Crude oil futures are down -0.52% at 34.77$, Gold futures are up +0.70% at $1056.90, DXY is down -0.36% at 98.914.

 US Economic Data

• Markit US Services PMI (Preliminary) is forecast at 55.9 for December, 0.2 point lower than previous month.
• Kansas City Fed manufacturing index is forecast at 2 in December higher than November level (1).

Canadian Economic Data

• CPI is down -0.1% MoM (+1.4% YoY) in November (0.1% MoM and 1.5% YoY Expec) versus October 0.1% MoM (1.0% YoY).
• CPI core came in at -0.3% MoM (2.0% YoY) in November (0.0% MoM and 2.3% YoY Expec) compared to previous month 0.3% MoM (2.1% YoY).
• Wholesale trade sales came in at -0.6% MoM in October worst than September -0.3% decrease and lower than expected (+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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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

Market update

US tsys opening higher, US 10Y 2.245 (-5.0bps) after mixed 8:30 US eco data, rallying overnite with equities as Fed rate hike seen removing uncertainty which had been looming over mkts. Core Euro bonds higher, outperforming tsys in big flattening move as gradual Fed rate hike path and ongoing ECB stimulus provide little reason to be bearish near term. Short covering in early Asian trading by Jap Hedge funds as well as buying in EGBs in London according to MNI. GOCs higher , slightly wider vs tsys in the post Fed rally – the rally in Can/US seemed to stall out yest despite the bullish backdrop for GOCs (diverging mon policy, lower oil…). Provis opening firmer (0.5bps) after closing tighter post FOMC, supply rumoured fom both Ont  & QC –

News headlines

• Fed rate rise is first step to rebalance US financial system (FT Yellen will need skill and luck to handle present distortions without sparking another crisis. All eyes are focused on the US Federal Reserve. By announcing a 25 basis point rate rise, Janet Yellen, Fed chair, has started weaning the American economy from its addiction to cheap money. Given the recent mixed economic data, economists are divided about the merits of this decision.
• Traders see next U.S. Fed rate hike in mid-2016 (Reuters) U.S. interest rates futures slipped on Thursday as traders expected the U.S. Federal Reserve would follow up with another rate increase by mid-2016 after ending its near zero rate policy on Wednesday.
• German Business Confidence Slips as Risks Weigh on Economy (Bloomberg) German business confidence unexpectedly slipped in December in a sign that companies are concerned about the risks facing Europe’s largest economy. The Ifo institute’s business climate index dropped to 108.7 from 109.0 in November. The median estimate in a Bloomberg survey of economists was for an unchanged reading.
• Norway keeps interest rates on hold at 0.75% (FT) Norway’s Central Bank has decided to keep its main interest rate on hold at 0.75 per cent – in line with economists’ expectations – but further cuts are expected next year. Norges Bank wrongfooted the market in September when it decided to cut its deposit rate by a quarter of a percentage point to a record low of 0.75 per cent against a backdrop of continued weakness in oil prices – Norway’s main export.
• FedEx Profit Boosted by Online Holiday Shopping (WSJ) FedEx Corp. on Wednesday said that this year’s peak holiday season is its busiest ever, and the pace has been consistent since Cyber Monday. Company executives said that the boom in e-commerce has resulted in a higher than expected number of packages during this holiday season. On Monday, the company picked up more than 26 million packages globally, executives said, and demand has been particularly high in the Northeast.
• Boeing Wins $10 Billion Plane Order From China Southern Air (Bloomberg) China Southern Airlines Co., Asia’s largest carrier by number of passengers, ordered 110 planes worth about $10 billion from Boeing Co., adding more efficient aircraft to its fleet with China set to become the world’s largest travel market in the next 20 years.
• AIG Ramps Up Stock Buyback Plan by $3 Billion (WSJ) American International Group Inc., under pressure from activists investors, said Wednesday that it raised its stock buyback authorization by $3 billion. The addition brings the company’s total authorization to $4.3 billion. AIG has bought back about $9.7 billion in shares this year as of Tuesday; its market capitalization is about $75 billion.
• Oracle’s Profits Fall on Stronger Dollar (WSJ) Oracle Corp.’s cloud business gained momentum in its latest quarter, but currency woes continued a recent pattern of holding down the company’s top and bottom lines. The big software company reported a 12% drop in profits for the second fiscal quarter. Nonetheless, that was better than Oracle’s predictions and Wall Street expectations, while the company’s 6% decline in revenue was in line with analyst estimates. Excluding the effects of a stronger U.S. dollar, Oracle said its net income fell 3% while revenue was flat.

Overnight markets

• Overview: IG25 5Y 88.770/89.337 (-0.410), US 10yr note futures are up +0.26% at 126-02+, S&P 500 futures are up +0.17% at 2067.25, Crude oil futures are down -0.56% at 35.32$, Gold futures are down -1.25% at $1063.3, DXY is up +1.12% at 98.972.

 US Economic Data

• Initial jobless claims came in at 271K  for the week ending December 12th, lower than expectations (275K) and prior week (282K).
• Continuing claims decreased to 2238K from 2245K but was higher than expected (2200K).
• Philadelphia Fed came in at -5.9 in December below November level of 1.9.
• 3Q 2015 US current account balance came in at -124.1bn  vs -118.6bn expected and -111.1bn for previous quarter.
• Leading index is forecast at 0.1% in November lower than October 0.6% increase.

Canadian Economic Data

• There is no major economic data 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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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

Market update

US tsys opening lower, US 10Y 2.29 (+2bps), stocks higher, core Euro bonds lower as well pre FOMC. Relative calm in mkts as consensus if for first Fed rate hike since 2006. Measures of stock & tsy mkt volatility, while off the lows, are still far from pre Sep FOMC levels. European data released o/n were mixed (French, German PMIs). German 2016 bond issuance came in at E212.5bln – this was already leaked by Reuters yest and was a factor cited in the huge slide in bunds yest morn. In Canada, GOCs are lower, provis unch after trading up yest aft.

News headlines

• Fed Poised to Mark the End of an Era (WSJ) The Federal Reserve’s likely decision Wednesday to raise short-term borrowing costs will mark the end of an era of zero interest rates, a period of extraordinary policy experimentation that has yielded mixed results.

• Fed rate decision: what to watch for It’s on. (FT) At least that is what futures imply and economists are forecasting about a rise in short-term interest rates from the US Federal Reserve later on Wednesday.

• UK unemployment rate falls to 5.2%, lowest in nearly 10 years (BBC) The UK unemployment rate fell to the lowest for nearly 10 years at 5.2% in the three months to October. It was the lowest jobless rate since the three-month period to January 2006, according to the Office for National Statistics (ONS). The number of people out of work fell by 110,000 to 1.71 million between August and October. There were 31.3 million people in work, 505,000 more than for a year earlier. Joblessness had been expected to remain at 5.3%, where it was a month ago, according to a poll of economists by news agency Reuters.

• Eurozone recovery bolstered by strongest PMI reading since crisis (FT) A flash reading for the influential purchasing managers’ index for the region, compiled by data company Markit, edged down this month, from 54.2 in November to 54. But the three most recent readings have been the strongest on average for four and-a-half years and were all well above the crucial 50 level that indicates an expansion in economic activity. A separate reading for the eurozone’s largest economy, Germany, edged down slightly from 55.2 to 54.9 but signalled rates of job creation remain strong. Activity in France, the region’s second-largest economy, slowed from 51 in November to 50.3, although a separate reading for manufacturing was the strongest for more than one and-a-half years.

• Congress Reaches Fiscal Agreement That Ends U.S. Oil Export Ban (Bloomberg) Congressional leaders unveiled a broad package of spending and tax legislation that would avert a U.S. government shutdown and lift the 40-year-old ban on crude oil exports.

• Valeant projects 30 percent growth in 2016 profit, shares jump (Reuters) Drugmaker Valeant Pharmaceuticals International Inc on Wednesday forecast that earnings would grow 30 percent in 2016, just below Wall Street’s highest expectations. Valeant shares rose 4.5 percent to $114.50 in premarket trading in New York, but remain far from an August high of $263.70.

• China central bank sees economic growth slowing to 6.8 percent in 2016 (Reuters) China’s annual economic growth is likely to slow to 6.8 percent next year from an expected 6.9 percent this year, the People’s Bank of China said in a working paper published on Wednesday. The world’s second-largest economy still faces downward pressure and the impact of fiscal and monetary policies that were rolled out this year will be evident by the first half of 2016, the central bank said in the research report.

Overnight markets

• Overview: IG25 5Y 89.436/90.011 (-0.822), US 10yr note futures are down -0.15% at 125-29+, S&P 500 futures are up +0.50% at 2047.25, Crude oil futures are down -0.46% at 37.18$, Gold futures are up +0.97% at $1070.8, DXY is down -0.03% at 98.189.

US Economic Data

• MBA mortgage applications came in this morning at -1.1% for the week ending December 11th, versus prior week 1.2% increase.
• Housing starts came in at 1173K (10.5% MoM) in November versus October 1062K (-12.0% MoM).
• Building permits increase to 1289K (11.0% MoM) in November compared to previous month 1161K (5.1% MoM).
• Industrial production is expected at -0.2% MoM in November compared to September -0.2%.
• Capacity utilization is forecast at 77.4% in November, 0.1% lower than previous month.
• Manufacturing production is expected at 0.0% MoM in November compared to 0.4% in October.
• Markit US Manufacturing PMI (Preliminary) is forecast at 52.6 in December, 0.2 point lower than prior month.
• FOMC Rate Decision is schedule at 14:00.

Canadian Economic Data

• Int’l securities transactions for November came in at 22.08B, higher than previous month (3.35B).

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, Pierre-Olivier Boulanger
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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