Market Update Tsys trading higher, 10Y 2.83 (-3bps), ‘risk off’ rally with European equities down 1.0%, US equity futures also lower (S&P -7.5), the USD index higher for a 3rd day , the euro below 1.22 the lowest since Jan 12th. Fed chair Powell’s second day of testimony before the US senate, as well as PCE, ISM data. Core EGBs also higher, 10Y gilt 5bps lower @ 1.45% underpinned by Brexit concerns, despite smaller than exp decline in UK manufacturing and strong mortgage approval data. GOCs higher, underperforming tsys ,10Y below 2.20% lowest since jan 18th. Provis opening 0.5bps wider , supply expected from Alberta after fiscal update – deficit for this FY 9.1bln vs 10.3bln in Q2 update. In corps , primary supply yest with $750mln GS July 2022 FRN @ 54, closed 53/51. Heathrow issued $400mln 10Y Maple @ 115.
News headlines
Global Stocks Slide, Treasuries Rise Before Powell: Markets Wrap (Bloomberg) European shares dropped the most since a global rout last month following sharp declines in Asia. Treasuries climbed and the dollar jumped to the highest since January as traders awaited a second appearance from Federal Reserve Chairman Jerome Powell, whose comments riled markets earlier this week.
Trump Expected to Announce Stiff Steel, Aluminum Tariffs (Bloomberg) President Donald Trump is set to announce steep tariffs on steel and aluminum imports Thursday, people familiar with the matter said, in what would be one of his toughest actions yet to implement a hawkish trade agenda that risks antagonizing friends and foes alike.
Tusk to May: Don’t Expect Frictionless Trade After Brexit (Bloomberg) European Union President Donald Tusk warned the U.K. that it can’t expect frictionless trade outside the bloc’s single market, lowering again Prime Minister Theresa May’s expectations a day before she’s due to deliver a major speech on her vision for the post-Brexit relationship.
U.K. Manufacturing Loses Steam Amid Brexit Worry (Bloomberg) U.K. manufacturing lost a bit of steam last month, with growth slipping to an eight-month low. IHS Markit’s manufacturing Purchasing Managers Index eased to 55.2 from 55.3 in January. While the figure was better than forecast and still implies expansion, Markit said it suggests a “marked downshift” in the pace of growth so far this year.
Futures flat ahead of Powell’s testimony (Reuters) Futures for Canada’s main stock index were little changed on Thursday, as U.S. Federal Reserve chairman Jerome Powell is set to continue his testimony to lawmakers later in the day. Financial markets barely moved on Tuesday when Powell made his initial public statements as Federal Reserve chief, but the calm evaporated a few hours later, when Powell, testifying before a U.S. House of Representatives committee, struck a bullish, and personal, tone on the strength of the economy.
TD Bank sails past Q1 profit estimates, boosts dividend (BNN) Toronto-Dominion Bank sailed past first-quarter profit expectations, prompting its CEO to hint the bank could be on pace to top its internal targets this year. Adjusted profit in the three months ending Jan. 31 rose to $2.95 billion from $2.56 billion a year earlier. On a per share basis, TD earned $1.56. Analysts were expecting $1.46 in adjusted earnings per share.
CSX reaffirms plan to boost profitability (BNN) U.S. railroad operator CSX Corp on Thursday reaffirmed that it would lower its operating ratio by 2020, ahead of its first investor day after the death of former Chief Executive Officer Hunter Harrison. The company said it would post an operating ratio of 60 per cent by 2020 and revenue growth at a compound annual rate of 4 per cent in 2019 and 2020.
Overnight markets
Overview: US 10yr note futures are up 0.286% at 120-13, S&P 500 futures are down -0.33% at 2705.5, Crude oil futures are down -0.96% at $61.05, Gold futures are down -0.86% at $1306.6, DXY is up 0.25% at 90.837, CAD/USD is up 0.23% at 0.7775.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.77% | 2 Year | 2.238% |
| 5 Year | 2.021% | 5 Year | 2.607% |
| 10 Year | 2.205% | 10 Year | 2.83% |
| 30 Year | 2.357% | 30 Year | 3.103% |
US Economic Data
| 8:30 AM | Personal Income, Jan 0.4% est 0.3% (0.4% prior) |
| Personal Spending, Jan 0.2% est 0.2% (0.4% prior) | |
| Real Personal Spending, Jan -0.1% est -0.1% (0.3% prior) | |
| PCE Deflator MoM, Jan 0.4% est 0.4% (0.1% prior) | |
| PCE Deflator YoY, Jan 1.7% est 1.7% (1.7% prior) | |
| PCE Core MoM, Jan 0.3% est 0.3% (0.2% prior) | |
| PCE Core YoY, Jan 1.5% est 1.5% (1.5% prior) | |
| Initial Jobless Claims, Feb 24th 210k est 225k (222k prior) | |
| Continuing Claims, Feb 15th 1931k est 1925k (1875 prior) | |
| 9:45 AM | Bloomberg Consumer Comfort, Feb 25th (56.6 prior) |
| Markit Manufacturing PMI, Feb est 55.9 (55.9 prior) | |
| 10:00 AM | Construction Spending MoM, Jan est 0.3% (0.7% prior) |
| ISM Manufacturing, Feb est 58.7 (59.1 prior) | |
| ISM Employment, Feb (54.2 prior) | |
| ISM Prices Paid, Feb est 70.0 (72.7 prior) | |
| ISM New Orders, Feb (65.4 prior) | |
| 03/01 | Wards Domestic Vehicle Sales, Feb est 13.30m (13.10m prior) |
| Wards Total Vehicle Sales, Feb est 17.20m (17.07m prior) |
Canadian Economic Data
| 8:30 AM | Current Account Balance, 4Q -16.35b est -17.65b (-19.35b prior) |
| 9:30 AM | Markit Canada Manufacturing PMI, Feb (55.9 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