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Market update

US Tsys lower/steeper, futures underperforming on avg volume. Big story overnight was Caixin flash China PMI was disappointing at 47, lowest since March 2009 and vs expectations of 47.5 but despite weaker Sep EZ flash PMIs the spin was that Q3 EZ growth was .4%, making it the best qtr in 4-yrs. Most global stocks up save Mexico, Brazil, Nikkei and China. Commodities bouncing, EGBs lower, EU peripheral spds behaved, USD mixed (lower vs EUR, CAD, SEK and NOK) MBS tighter, US Swaps wider. Overnight in Tokyo, Tsys opened flat and meandered down but spiked while equities tanked on the Caixin PMI data but on low volume. In London, Tsys ebbed from the getgo, led by weaker European bond mkts. This mostly on not as bad as feared PMI data. France Markit mftg PMI Sept flash 50.4 vs 48.6 exp, German Sep Services PMI 54.3 vs exp 54.5, German Sep Mfg PMI 52.5 vs exp 52.6, German Markit New Orders And Employment were up, Markit Sep EZ Mfg PMI 52.0, on tgt but below prior at 52.3, Markit Sep EZ Services PMI 54.0, below exp of 54.2 and prior 54.4. Elsewhere, Deutsche Bank lower DAX target for yr end ’15 & ’16 to 10300 & 11200. Today Lockhart speaks at 12:30. Auctions include $13B 2Y RO FRN and $35B 5Y. (MNI)

News headlines

•  China manufacturing contracts at fastest pace in more than 6 years (FT) China’s crucial manufacturing sector is having its worst month since the depths of the global financial crisis in early 2009, according to a preliminary reading of a closely watched factory survey. The flash reading of the Caixin China general manufacturing purchasing managers’ index dropped to 47 points in September, down from 47.3 in August, marking the worst performance for the sector in 78 months.
• Eurozone Economy Slows Moderately in September. (WSJ) Surveys of purchasing managers show that Chinese weakness hasn’t had a big impact in the Eurozone. Activity in the eurozone’s manufacturing and services sectors slowed moderately in September, although there were few signs that a weaker outlook for China and some other large developing economies is undermining the currency area’s modest recovery.
• Alexis Tsipras Appoints New Greek Cabinet Much Like the Old (NYTimes) Greece’s newly re-elected prime minister, Alexis Tsipras, decided on Tuesday on a new cabinet with few new faces and returned the critical job of finance minister to Euclid Tsakalotos, the low-key economist who made headway with his eurozone peers in bailout negotiations. Under pressure from Greece’s European partners to start work on a barrage of economic reforms underpinning the country’s third bailout, Mr. Tsipras kept his core economic team essentially intact.
• Gross Tells Fed to `Get Off Zero Now!’ as Economies Run on Empty (Bloomberg) Bill Gross said the Federal Reserve needs to raise interest rates as soon as possible, trading some near-term market losses for longer-term stability and a healthier financial system.
• MetLife Increases Share Buyback Authorization to $1 Billion (WSJ) MetLife Inc. has raised to $1 billion the amount it has set aside to buy back shares, the insurer’s third increase since it resumed buying back its stock last year. The nation’s biggest life insurer by assets has been building capital ahead of expected stiffer federal capital rules.
• Volkswagen Faces German Probe Into Disclosure of Emissions Scandal (WSJ) Germany’s financial watchdog BaFin on Wednesday said it is investigating whether Volkswagen should have disclosed information regarding its emissions scandal sooner than it did and whether a delay could have led to irregular trading in the car maker’s shares, which dropped sharply over the past two days.
• China Said to Suspect Citic of Insider Trading During Rescue (Bloomberg) A Chinese probe found evidence that Citic Securities Co., the nation’s biggest brokerage, engaged in insider trading connected to the government’s rescue of the stock market, people familiar with the matter said.

Overnight markets

• Overview: IG25 5Y 82.904/83.229 (-0.089), US 10yr note futures are down -0.10% at 127-31+, S&P 500 futures are up +0.26% at 1937.0, Crude oil futures are up +0.65% at 46.66, Gold futures are up +0.32% at $1128.4, DXY is up +0.07% at 96.354.

US Economic Data

• MBA mortgage applications came in this morning at +13.9% for the week ending September 18th, versus prior week -7.0% decrease.
• Markit US Manufacturing PMI (Preliminary) is forecast at 52.8 in September, 0.2 point lower than prior month.

Canadian Economic Data

• Retail sales went up 0.5% MoM in July, worse than expectations of a 0.7% increase, after increasing 0.4% the previous month (revised 0.2% down).

 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  trading higher, US 10Y 2.17 (-3bps) on global equity weakness with Volkswagen shares down another 18% and resource stocks down sharply – the FTSE metals & mining index -5.5%. 10Y US swap spreads narrowed to the lowest since Sep 2010 on corp issuance with ~$19bln expected to price today compared to $10bln for all of last week. Core European bonds higher, spds tighter vs tsys led by 10Y bunds on speculation ECB will extend QE. Buy stops triggered in bunds break above 155.51 according to MNI, with a spike in volume ~6:00EST (20k contracts). VW emissions probe is impacting the broader auto sector – VW CDS +130 since yest, BMW 105/115 (+34) and DAIGR 100/110(+35). Today’s focus on $26bln 2Y note auction with the WI 0.722%. GOCs are higher led by 10s (~3bps on the curve), spds tighter vs tsys reversing yesterday’s Poloz related cheapening. Provi spds are wider again, after widening 0.5bps yest – Ont 46 rumoured (102/101)as well as new QC 48. CHT 5Y pricing this morning @48.

News headlines

• Global Stocks Turn Sharply Lower (WSJ) Global stocks turned sharply lower on Tuesday, as worries about the pace of global growth and uncertainty about the Federal Reserve’s plans to raise interest rates continued to fuel big swings in markets.

• VW to set aside €6.5bn over emissions scandal (FT) Shares in Volkswagen tumbled nearly 20 per cent after it revealed it will set aside €6.5bn in its third quarter to deal with a sprawling emissions scandal that the carmaker now says affects some 11m vehicles worldwide.

• Glencore Falls to Record as Mining Shares Lead Stock Losses (Bloomberg) Mining shares including Glencore Plc led a slump in European equities as metals prices tumbled on fears that an economic slowdown in China, the world’s biggest consumer of raw materials, is deepening.

• Credit markets suffering from indigestion (FT) A flurry of European and US debt sales earlier this month has left companies facing a higher price of funding as capital markets suffer indigestion. Hefty debt sales during September pushed Moody’s Baa credit average yield above 5.40 per cent last week, the highest level since late in 2013 and the measure remained elevated on Monday at 5.31 per cent.

• Forecast for economic growth in 2016 gets gloomier (G&M) For the third month in a row, economists are lowering their expectations for growth in 2016, adding pressure on federal finances at a time when party leaders are crisscrossing the country promising billions in new spending and tax cuts.

Overnight markets

• Overview: IG25 5Y 82.704/83.087 (+1.682), US 10yr note futures are up +0.33% at 127-25+, S&P 500 futures are down -1.71% at 1929.5, Crude oil futures are down -2.83% at 45.36, Gold futures are down -0.43% at $1127.9, DXY is up +0.22% at 96.106.

US Economic Data

• FHFA House price index is forecasted to increase 0.4%  MoM in July versus previous month +0.2%.
• Richmond Fed Manufacturing activity index is expected at 2 in September higher than August (0).

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 & ~1bp steeper, US 10Y 2.17 (+3.7bps).  Tsys pressured by some hawkish comments from Fed governors  Bullard and Williams. Yet as corp supply is expected to pick up significantly this week  (25-30bln after only 10bln last wk) while the US auction 2/5/7 this week with the 5Y at the most expensive on the curve since March 2014. In Canada, GOCs are lower led by 10s (~2bps), 1bp tighter vs tsys with longs outperforming for a second day after Fri saw a good amt of screen buying for cash and against 10s. Corps softer on Fri on rumours of NVCC supply , Hydro One downgrade. CMB new 5Y issue launched, ~48bps.

News headlines

• The New Bond Market: Bigger, Riskier and More Fragile Than Ever (WSJ) Stocks rise and fall, but bonds are starting to make people anxious no matter what they do.The U.S. bond market is among the biggest financial markets in the world, with $39.5 trillion outstanding at mid-2015, the Securities Industry and Financial Markets Association says.

• Weak growth leads Moody’s to cut France’s credit rating (FT) Moody’s has lowered France’s government bond rating by one notch because of the country’s weak growth outlook — a move that overshadows the French government’s upbeat stance on the pace of recovery.

• Plunging oil prices put question mark over $1.5tn of projects (FT) Plunging oil prices have rendered more than a trillion dollars of future spending on energy projects uneconomic, according to a study that suggests that the impact on industry operators is worsening.

• Oil Speculators Most Bullish on U.S. Crude Price in Two Months (Bloomberg) Hedge funds slashed their bets on falling oil prices, leaving them the most bullish on U.S. crude futures in two months.

• Wall Street Tosses Out Bond-Trading Script After Fed Meeting (Bloomberg) Neil Bouhan at BMO Capital Markets expected the Federal Reserve to raise interest rates this week. Now he’s questioning all his views on the central bank.

• Canadian retailers poised to raise prices amid slumping loonie (G&M) Retailers are expected to hike prices in the coming months as they feel the pinch of a weak Canadian dollar and higher costs for imported goods.

• Leaders ignored TFSAs and OAS changes during debate (G&M) One of the most intriguing facets of last week’s leaders’ debate was the determination with which all candidates steered clear of two issues that directly affect your personal bottom line.

Overnight markets 

• Overview: IG25 5Y 81.62/82.06 (+3.588), US 10yr note futures are down -0.24% at 127-21, S&P 500 futures are up +0.46% at 1959.5, Crude oil futures are up +2.48% at 45.79, Gold futures are down -0.49% at $1132.2, DXY is up +0.74% at 95.569.
• US BANK CDS (5yr): BAC 72/76 (+0), GS 87/91 (+0), MS 78/82 (+0), C 80/84 (+0), JPM 71/75 (+0), WFC 52/56 (+0)

US Economic Data

• Existing home sales are forecast at 5.5M (-1.6% MoM) in August versus July 5.59M (2.0% MoM).

Canadian Economic Data 

• Wholesale trade sales came in at 0.0% MoM in July worse than June 1.3% increase and lower than expected (0.8%).
• 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