Market Update

Tsys mildly higher over since early NA trade reversing declines in Asia, on heavy volume (650K TY1), longs underperforming with the 10Y 2.817 (-0.7). Tsys lagging the strong rally in bunds, gilts. EGBs underpinned by late day selloff in US equities, followed by weaker Euro equities (Stoxx -1.6%). GOCs higher before employment data – consensus is for only a 10K increase in employment for Jan after a Nov/Dec saw the strongest two month increase since 2012 (145k). The minimum wage increase in Ontario as well as colder weather also expected to hold down January’s increase.  Also worth watching will be the unemployment rate which fell to a new low 5.7% in Dec, while hourly earnings rose to a cycle high 2.9% and hours worked up 3.3%.

News headlines

Stocks Enter Correction as Rate-Hike Fears Return: Markets Wrap (Bloomberg) The dread that gripped equity markets earlier in the week re-emerged Thursday as U.S. stocks plunged into a correction on concern that rising interest rates will drag down economic growth. Selling accelerated in the final hour of trading as major indexes breached round-number milestones they blew past just weeks ago. The S&P 500 tumbled through 2,600 and the Dow failed to hold 24,000. Both are headed toward their average price for the past 200 days, a level that technical analysts say may act as a magnet and a floor.

Senate Passes Delayed Budget Deal in Bid to End U.S. Shutdown (Bloomberg) The Senate passed a two-year budget agreement early Friday that would boost federal spending by $300 billion and suspend the debt ceiling for a year, as lawmakers sought to end a partial government shutdown that began at midnight after Congress missed a funding deadline.

Never Compromise on U.K.’s Brexit Demands, May Tells Team (Bloomberg) After last year’s disastrous election result, U.K. Prime Minister Theresa May was described as a dead woman walking. Yet despite numerous mishaps, she still refuses to accept she’s finished. Now May is taking the same determination that has kept her in office against the odds into the latest chapter in Brexit negotiations, according to officials who work closely with her.

China Ends 25-Year Wait as Yuan Oil Futures to Start Trading (Bloomberg) After a wait of about a quarter of a century, the world’s biggest oil buyer is finally getting its own crude-futures contract. In a challenge to the world’s dollar-denominated oil benchmarks Brent and West Texas Intermediate, China will list local-currency crude futures in Shanghai on March 26, according to the nation’s securities regulator. The start of trading, open to foreigners, will mark the end of years of delays and setbacks since China’s first attempt at a domestic contract in 1993.

Qualcomm Rejects Broadcom’s Higher $121 Billion Hostile Bid (Bloomberg) Broadcom Ltd. said its $121 billion acquisition proposal for Qualcomm Inc. is the “best and final” offer after the target’s board unanimously rejected the sweetened bid, likely leaving the future of the hostile takeover bid to be decided by shareholders next month. Broadcom Chief Executive Officer Hock Tan urged Qualcomm to meet this weekend to discuss the $82 a share offer and dangled the prospect of an $8 billion reverse termination fee in a letter to Paul Jacobs, chairman of the board. Tan said he was “astonished” the target wasn’t willing to meet until Tuesday, after the companies are scheduled to meet with proxy advisers Glass Lewis and ISS.

Canada says will clamp down on arms exports amid rights concerns (Reuters) Freeland told legislators that Canada would not allow the export of a weapon “if there were a substantial risk that it could be used to commit human rights violations.” She made her remarks a day after Ottawa said it was reviewing the sale of 16 helicopters to the Philippines amid concerns the aircraft could be used to fight rebels. Current regulations mean governments need only carry out a study of the general risks that might be involved in a sale.

Futures lower ahead of jobs report (Reuters) Stock futures pointed to a lower opening for Canada’s main stock index on Friday as investors awaited monthly jobs data, a week after a similar U.S. report sparked a week-long sell off. However, compared with a strong U.S. jobs market, Canadian employment growth is expected to have slowed in January, the report due at 8:30 a.m. ET is expected to show. Economists polled by Reuters expected that just 10,000 jobs were created last month, with the unemployment rate forecast to have increased 5.8 percent.

Expedia shares sink after disappointing 2018 forecast (BNN) Shares of U.S. online travel services company Expedia fell 19 per cent in premarket trading on Friday, after forecasting 2018 selling and marketing costs would outpace revenue growth as it battles rivals for market share. The company, which owns brands including Expedia.com and Hotels.com, reported equally disappointing previous quarter results in October partly due to underperformance by its Trivago hotel-search website.

Overnight markets

Overview: US 10yr note futures are up 0.116% at 121-01, S&P 500 futures are up 0.04% at 2594.5, Crude oil futures are down -1.34% at $60.33, Gold futures are down -0.08% at $1317.9, DXY is up 0.07% at 90.288, CAD/USD is down 0% at 0.7935.

Cda Benchmarks Yield Tsy Benchmarks Yield
2 Year 1.796% 2 Year 2.11%
5 Year 2.092% 5 Year 2.545%
10 Year 2.352% 10 Year 2.833%
30 Year 2.499% 30 Year 3.14%

US Economic Data

10:00 AM Wholesale Inventories MoM, Dec est 0.2% (0.2% prior)
Wholesale Trade Sales MoM, Dec est 0.4% (1.5% prior)

Canadian Economic Data

8:30 AM Net Change in employment, Jan est 10.0k (78.6k prior)
Unemployment Rate, Jan est 5.8% (5.7% prior)
Full Time Employment Change, Jan (23.7 prior)
Part time Employment Change, Jan (54.9 prior)
Participation Rate, Jan (65.8 prior)


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, Hugues Savard

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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