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Market update

US tsys lower, curve steeper , US 10Y 2.025 (+3bps) as equities are higher while the tsy mkt continues to price out rate hikes this year. Odds of a 25bp hike at the Mar 16 meeting have been pared back to ~50% from 66% on Thursday pre nonfarm. Fed Rosengren, in an interview with MNI, said that a 2015 rate hike is still appropriate. Core Euro bonds lower led by UK 10Y gilts despite weaker UK service PMI. GOCs are lower, steeper, longs ~2bps wider , 10/30 @79. Provis weaker, Ont 46s trading down @113, 25s @ 104, negative tone stemming partly from news Ontario decided to pull Euro benchmark 10Y sale.

News headlines

• Euro-Area Growth Seen Slowing in Sign More Stimulus May Be Ahead (Bloomberg) The euro region’s economic recovery risks faltering after growth momentum eased in September, Markit Economics said. A Purchasing Managers’ Index for manufacturing and services fell to 53.6 in September from 54.3 in August, the London-based company said in a report on Monday. That’s below a Sept. 23 preliminary reading of 53.9. A print above 50 indicates expansion.

• Despite ‘weak’ jobs report, Fed’s Rosengren still sees 2015 rate hike (CNBC) Eric Rosengren still expects the Federal Reserve to raise interest rates this year despite what the head of the Boston Fed called a “weak” September jobs report, which could signal a more significant economic slowdown that delays the policy tightening.

• Glencore surges 70% on Viterra sale speculation (G&M) Shares of Glencore, the world’s biggest commodities trader, surged more than 70 per cent in Hong Kong trading and rose 20 per cent in early London trading on speculation that it is open to takeover offers and is close to selling its Canadian agriculture business.

• Suncor Energy Inc launches unsolicited offer to buy Canadian Oil Sands Ltd for $4.3 billion (FP) Suncor Energy Inc., Canada’s biggest energy company, made an unsolicited offer to acquire all outstanding shares of Canadian Oil Sands Ltd. for about $4.3 billion, taking advantage of plunging crude prices to add production in Alberta.

• National Bank forced to cut as many as 400 jobs as economy, investment risk takes toll (FP) National Bank of Canada will cut as many as 400 jobs, or 2.3 per cent of its workforce, as it seeks to reduce costs amid changes in technology and customer preferences, a person familiar with the plan said.

Overnight markets 

• Overview: IG24 5Y 85.556/86.281 (-2.096), US 10yr note futures are down -0.16% at 129-04+, S&P 500 futures are up +0.73% at 1957.25, Crude oil futures are up +0.83% at 45.92, Gold futures are down -0.04% at $1136.2, DXY is down -0.07% at 95.767.

US Economic Data

• Markit US Services PMI for August (Final) is forecast at 55.6, equal to preliminary report.
• ISM non-manufacturing is forecast at 57.5 in September lower than August 59.0.
• Labor market conditions for September will be release at 10:00 and is forecasted at 1.4 after a 2.1 level in August.

Canadian Economic Data

• Bloomberg Nanos Canadian Confidence Index will be released today at 10:00am.

 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 sharply higher, curve 5bps steeper, US 10Y below 1.95% (-9bps) with Fed fund futures pushing out the first rate hike to March 16 at the earliest. Payrolls were weak all around, except for the unemployment rate which was unch at 5.1%. Payrolls were well shy of expectations, the workweek declined and AHE were flat. GOCs are higher, lagging tsys by 2-4bps mostly in the short end as Fed fund futures reprice rapidly, longs underperforming  by ~3bps, 10s/30s above 80.Provis 0.5bps- 1 bp wider since payrolls, 3 bps since yest, Ont 46s 114/113.5, Ont 25s 105/104.

News headlines

• S. gains 142,000 new jobs in September; unemployment 5.1% (Maketwatch) The U.S. economy created just 142,000 new jobs in September and the number of new hires in August and July was also revised lower, suggesting the labor market cooled off toward the end of summer.

• US earnings pose test for bullish views (FT) Having endured the worst quarterly performance in four years, US equity investors have priced in plenty of bad news for the global heavyweight of share markets. Or have they?

• The credit bubble, the bears and the central bankers (FT) When officials at the International Monetary Fund and World Bank first decided to hold this year’s annual meeting in Peru, some hoped that the location would offer a celebratory backdrop.

• US swap dealers return to negative quotes (FT) A dislocation between the two interest rate markets shows little sign of easing, with US derivative traders quoting negative figures for benchmark swaps over Treasury yields.

• Glencore Isn’t Out of the Woods Yet (NYT) Shares of Glencore, the giant Swiss-based mining and trading company, may have recovered from a panic sell-off this week, but few analysts consider the company out of danger.

Overnight markets 

• Overview: IG24 5Y 92.470/93.187 (+2.985), US 10yr note futures are up +0.66% at 129-19, S&P 500 futures are down -1.1% at 1895.75, Crude oil futures are up +0.63% at 45.02, Gold futures are up +1.25% at $1127.6, DXY is down -0.87% at 95.344.

US Economic Data

• Change in nonfarm payrolls was 142K MoM in September compared to August 136K and 201K was expected.
• Unemployment came in at 5.1% in September equal to 5.1% in August and was expected at 5.1%.
• Participation rate came in at 62.4 in September versus 62.6% for previous month.
• Avg hourly earnings increase 0.0% MoM (2.2% YoY) in September versus 0.3% MoM (2.2% YoY) for August.
• Avg weekly hours came in at 34.5 in September 0.1 hour lower than previous month.
• ISM New York (September) will be release at 9:45 (last report: 51.1).
• Factory orders are expected at -1.2% MoM in August fallowing +0.4% in July.

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 yet well of o/n lows after ADP, Fed Dudley remarks. Tsys started to climb off the lows pre ADP, which came in above exp (200k vs 190 exp) 10Y 2.085 (+2.5bp), curve ~1bp steeper. Equities higher – Euro stocks up 2.8%, DJ futures +1.1%, USD higher reversing yest declines. Core EU bonds lower on ‘risk-on’ despite Eurozone inflation decline into negative territory (see above), thou UK Q2 GDP was strong (mostly revisions) while German unemployment fell in Aug to 4.5% from 4.6%. GOCs lower in line with tsys, no reaction to Jul GDP (0.8 vs 0.7, June revised lower 0.5 vs 0.6 y/y). Yest saw GOCs widen 3-4 bps across the curve in the US rally, so 10s @ -62bps are the cheapest since late June. Provis opening 0.5bps tighter after some late day screen buying yest, thou we heard there was some selling overnite.

News headlines

• Equities rally as dismal quarter draws to a close (FT) Global stock benchmarks are rallying as investors seek “bargains” at the end of a dismal quarter for many risk assets. Core government bond yields are rising as the flight to safety reverses, while many recently battered commodities are seeing strong demand.

• Japan on brink of technical recession (FT) Japan is on the verge of a technical recession after data on industrial production raised the prospect of a second consecutive quarter of negative growth.

• Eurozone inflation tumbles below zero for first time in six months (FT) Eurozone inflation slipped below zero in September, a development that is likely to spur further calls for the European Central Bank to ratchet up its €60bn per month asset-purchase programme.

• Pimco Sees Fed ‘Phantom Rate Hike’ at Root of Market Volatility (Bloomberg) Financial-market volatility has climbed as investors wait for a Federal Reserve shift that policy makers have signaled yet failed to deliver, according to  Tony Crescenzi at Pacific Investment Management Co.

• Hedge Funds Devise Trades to Benefit From ETFs’ Woes (WSJ) Wall Street is concocting ways to capitalize on potential weak spots in exchange-traded funds, which showed signs of vulnerability during the recent market turmoil.

Overnight markets

• Overview: IG24 5Y 86.429/87.025 (-1.461), US 10yr note futures are down -0.19% at 128-18, S&P 500 futures are up +1.07% at 1894.5, Crude oil futures are down -0.49% at 45.01, Gold futures are down -0.88% at $1116.9, DXY is up +0.37% at 96.212.

US Economic Data

• MBA mortgage applications came in this morning at -6.7% for the week ending September 25th, versus prior week 13.9% increase.
• ADP employment change came in at 200K in September compared to 186K in August (Expected 190K).
• ISM Milwaukee is expected at 48.5 in September versus 47.67 in August.
• Chicago purchasing manager index is forecast at 53.0 in September lower than August 54.4.

Canadian Economic Data

• GDP MoM in July increased 0.3% MoM (+0.8% YoY) compared to 0.4% MoM (+0.5% YoY) in June.

 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