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Market update

US tsys opening sharply lower despite China equites being down sharply again (7.6%), US 10Y 2.07 (+6.5bps), curve ~1.5bps steeper. Tsys were under pressure since mid-morning, falling to lows once China rate cut was announced at 6:15EST. Euro stocks up 4.6%, USD index higher for 1st time in five days. Core Euro bonds lower led by ~10bp selloff in 10Y bunds on catch-up to yest & stronger IFO (see above). In Canada, GOCs much lower led by 10s – 3bps wider on the curve, longs off $1.30. Provis in ~1.5bps from yest close, Ont 46 traded 100.5., QC/Ont 45 6.5/6.0 from 7 yest.

News headlines

• China’s Central Bank Cuts Interest Rates (WSJ) China took fresh moves to free up money for its slowing economy, after global investors expressed concerns over Beijing’s management of the world’s No. 2 economy.

• Most Stock Markets Higher, Despite Another Steep Drop in Chinese Shares (WSJ) The global market rout showed signs of easing Tuesday, as U.S. stock futures and European stocks surged despite another sharp drop in Chinese stocks.

• Market turmoil clouds Fed rate outlook (FT) For the Federal Reserve, the China-induced equity slump could hardly have come at a more sensitive time. The US central bank has been meticulously priming financial markets for an interest rate rise all year, with next month’s meeting widely seen as its best opportunity to pull the trigger.

• German business morale brightens as Greece jitters ease (Reuters) Business confidence in Germany unexpectedly improved in July after two monthly drops as an agreement between Greece and its creditors for talks on a third bailout lifted the mood at firms in Europe’s largest economy.

• Oil Traders Race for Cover as Light at End of Tunnel Grows Dim (Bloomberg) What a difference a few days make. Investors are willing to pay the most since mid-July to protect from a drop in U.S. crude prices by the end of the year, according to a measure of options values. That’s a reversal from Aug. 20, when the premium for puts over calls was the smallest in nine months.

Overnight markets

• Overview: IG24 5Y 83.5/84.2 (-4.15), US 10yr note futures are down -0.50% at 128-18, S&P 500 futures are up +3.43% at 1935.5, Crude oil futures are up +3.71% at 39.66, Gold futures are down -0.23% at $1150.90, DXY is up +0.85% at 94.121.
• US BANK CDS (5yr): BAC 79/84 (-6), GS 99/104 (-5), MS 92/97 (-3), C 91/96 (-4), JPM 80/85 (-6), WFC 61/66 (-4)

 US Economic Data

• FHFA House price index is forecasted to increase 0.4%  in June versus previous month 0.4%.
• Case-Shiller house price index (20-City) is forecasted at 5.10% in June following a gain of 4.94% in May.
• Markit US Manufacturing PMI (Preliminary) is forecast at 55.1 for August, 0.6 point lower than previous month.
• New home sales are forecast at 510K (5.8% MoM) in July versus June 482K (-6.8% MoM).
• Consumer confidence Index is expected at 93.4 in August compared to 90.9 for the previous month.
• Richmond Fed Manufacturing activity index is expected at 10 in August lower than July (13).

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 sharply higher on rout in global equities, with tsys reaching new highs mid-morning. US 10Y below 2.0%, fell as low as 1.95% at ~5:30EST, now 1.98 (-5bps). China stocks fell 8% in the largest decline since 2007, S&P mini -~4.0%, crude below $40.  Core Euro bonds mixed with German bunds slightly higher, gilts sharply higher, peripheral spds wider led by Greece.  In Canada, GOCs are higher, lagging the move in tsys by 2-4 bps. Provis gapping wider, Ont 45s 101.5-100.5 (~4bps), CMB 25s issued last week @59 – 63/60.5.

News headlines

• China plunges 8.5% triggering global rout (FT) World stocks sank on Monday after an 8.5 per cent plunge in Chinese shares that stoked mounting fears of a China-led global economic slowdown. The Shanghai Composite racked up its worst day since February 2007, wiping out all its gains of 2015, in a tumultuous session that even Xinhua, the official Chinese news agency, dubbed “Black Monday”.
• China to Flood Economy With Cash as Global Markets Lose Faith (WSJ) The selloff in Chinese stocks accelerated Monday, adding pressure on Beijing, which is planning to flood its banking system with new liquidity to offset effects of its recent surprise currency devaluation, according to Chinese officials and advisers to the central bank.
• The Fed Has a Theory. Trouble Is, the Proof Is Patchy (WSJ) Federal Reserve officials might raise interest rates soon because they have a theory: Falling unemployment pushes up prices and wages, requiring tighter credit to keep inflation in check.
• Oil slump weighs on Canadian bank stocks as Big Six report earnings (G&M) Canadian banks are facing a tough economic environment, raising some uncertainty among observers over what the Big Six’s quarterly financial results will look like this week.
• How much longer can Saudi Arabia’s economy hold out against cheap oil? (FP) The oil price was near its lowest in more than a decade, cash reserves were being depleted, emerging markets were in turmoil and Saudi Arabia was beginning to panic.

Overnight markets

• Overview: IG24 5Y 87/87.65 (+4.58), US 10yr note futures are up +0.51% at 129-10+, S&P 500 futures are down -3.92% at 1894.25, Crude oil futures are down -3.39% at 39.08, Gold futures are down -0.09% at $1158.60, DXY is down -1.42% at 93.658.
• US BANK CDS (5yr): BAC 78/83 (+3), GS 97/102 (+2), MS 87/92 (+2), C 87/92 (+1), JPM 78/83 (+2), WFC 58/63 (+2)

 US Economic Data

• Chicago Fed National activity index came in at 0.34 in July (0.20 expec.) and better than June revised number of -0.07.

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 trading unch on low volume in narrow o/n range, US 10Y 2.07%. Tsys rose initially in weak China data (see above) but gave up gains in Europe after stronger PMIs. Euro stocks ~1.3% lower, gold & oil lower as well. Triple with today likely to add to volatility in equities. Core EU bonds mixed, gilts sharply higher. In Canada, GOCs slightly higher after CPI/Retail Sales with the latter up 0.6% vs 0.2% exp.  Provis opening wider , Ont 45s traded up @97 earlier now 97.5/96.5 , Qc 45s 105/104 +0.5bps.

News headlines

•  No End in Sight for Oil Glut (WSJ) When oil prices started to edge down a year ago, most energy mavens thought the drop would be small and short-lived. Instead, the price of crude has plunged by almost 60% from its 2014 peak—and suddenly looks likely to stay low for months and maybe years to come.
• China August Manufacturing Activity Hits Lowest Level Since 2009 (WSJ) An early gauge of China’s factory activity fell to a six-and-a-half year low in August despite China’s efforts to reinvigorate slowing economic growth.

• Weaker euro boosts eurozone export orders (FT) The eurozone’s recovery strengthened a little this month as the weaker euro led to a rise in new export orders for the region’s businesses, according to an influential poll of the region’s purchasing managers.

• Greek bonds rally on hopes of QE buying (FT) Greek government bonds, pariah of global markets for much of this year, are back in favour once again as investors bet that the country’s latest rescue deal has left it on the cusp of inclusion in Europe’s €1.1tn bond buying programme.

Overnight markets

• Overview: IG24 5Y 80.7/81.2(-0.05), US 10yr note futures are up +0.17% at 128-17+, S&P 500 futures are down -0.68% at 2011.75, Crude oil futures are down -0.63% at 41.06, Gold futures are up +0.39% at $1157.70, DXY is down -0.70% at 95.311.
• US BANK CDS (5yr): BAC 73/77 (+0), GS 93/97 (+0), MS 83/87 (+0), C 83/87 (+0), JPM 74/78 (+0), WFC 54/58 (+0)

 US Economic Data

• Markit US Manufacturing PMI (Preliminary) is forecast at 53.8 for August, equal to previous month.

Canadian Economic Data

• Retail sales went up 0.6% MoM in June, better than expectations of a 0.2% increase, after increasing 0.9% previous month.
• CPI decrease 0.1% MoM (1.3% YoY) in July (0.1% MoM and 1.3% YoY Expec) versus June 0.2% MoM (1.0% YoY).
• CPI core came in at 0.0% MoM (2.4% YoY) in July (0.0% MoM and 2.4% YoY Expec) compared to previous month 0.0% MoM (2.3% YoY).

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