cti2015header-morning comments web

Market update

US tsys mixed, short end modestly lower ,longs underperforming US 10Y 1.748 (-1.8bps). Tsys moving lower as stock futures improved o/n, Euro sotxx up ~1.0%. ISM Manufacturing coming up at 10:00EST after yest Feb Chicago PMI came in much weaker than exp (47.6 vs 52.5) – yet the index has been fairly eratic of late while Edmunds.com expects the best Feb for auto sales in 15 yrs.  GOCs are higher , spds narrower vs tsys despite Q4 GDP coming in 0.8% vs unch exp. Provis starting the day ~0.5bps weaker on supply rumours, with Sask 10Y, QC 10Y reopening, …

News headlines

  • OPEC watching Iran, Russia, unlikely to cut output in June (Reuters) OPEC is very unlikely to cut output at its next meeting in June, even if prices remain extremely low, according to OPEC sources and delegates, as it will be too early to say how fast Iranian output is rising. The sources, which include officials from the Middle East, say OPEC countries such as Saudi Arabia also want to test Russia’s commitment to freezing output before taking any further steps to stablize prices.
  • S. Index Futures Signal Equities to Rebound After Monthly Drop (Bloomberg) U.S. stock-index futures rose, indicating equities will rebound after capping their third consecutive month of losses, amid investor optimism about central bank support. Standard & Poor’s 500 Index contracts expiring in March rose 0.8 percent to 1,945.25 at 7:29 a.m. in New York. Equities erased a monthly gain yesterday, as banks and health-cares stocks put the brakes on a two-week rebound. While the index is still 5.6 percent above a Feb. 11 low, it’s 9.3 percent off an all-time high reached last May. A measure of volatility has jumped 13 percent this year. Dow Jones Industrial Average futures rose 125 points, or 0.8 percent, to 16,622, today.
  • Caixin China PMI notes shrinking staffs (FinancialTimes) Another abysmal PMI reading for China’s manufacturing sector. The Caixin-sponsored composite PMI for February came in at 48, below expectations for 48.4. It had been 48.4 in January. The 50-mark separates contraction from expansion. The reading means the sector has been shrinking for a whole year now, and was its lowest in five months.
  • Yuan Halts Seven-Day Losing Streak as PBOC Raises Reference Rate (Bloomberg) China’s yuan advanced for the first time in eight days, with a stronger central bank reference rate easing pressure spurred by Monday’s cut to lenders’ reserve ratios. The currency climbed 0.1 percent to 6.5475 a dollar as of 4:44 p.m. in Shanghai, according to China Foreign Exchange Trade System prices. The offshore yuan traded in Hong Kong reversed an early loss and gained 0.06 percent after the People’s Bank of China raised its reference rate by 0.1 percent to 6.5385.
  • Chinese Officials Assure Lew There’s No Plan to Devalue Yuan (Bloomberg) China’s officials said there is no intention or need to devalue the yuan, according to U.S. Treasury Secretary Jacob J Lew, who was speaking at a briefing in Hong Kong after Monday meetings with Premier Li Keqiang in Beijing. Policy makers in China restated plans to rebalance the economy and cut excess capacity, and said they have the policy tools — monetary, fiscal and structural — to do the job, Lew said Tuesday. He discussed with them the need « for clear communication and frequent communication. »
  • Euro sinks as weak data piles pressure on European Central Bank (Reuters) The euro hit its lowest in almost three years against the yen while European shares extended their strongest run of the year on Tuesday as data from around the region bolstered the case for more ECB stimulus next week. Asia had risen after weak China data fanned stimulus hopes there, and the same pattern emerged in Europe as euro zone manufacturing activity expanded at its weakest pace for a year despite more deep discounting.
  • Fed’s Dudley sees downside risks to U.S. economic outlook (TheGlobeandMail) An influential Federal Reserve official on Tuesday said he sees downside risks to his U.S. economic outlook, an assessment that could flag a longer pause before the Fed’s next interest-rate hike than he and his colleagues had earlier signaled. “At this moment, I judge that the balance of risks to my growth and inflation outlooks may be starting to tilt slightly to the downside,” New York Federal Reserve President William Dudley said in remarks at a conference in Hangzhou, China sponsored by the People’s Bank of China and the New York Fed.
  • Argentina, lead creditors settle 14-year debt battle for $4.65 billion (Reuters) Argentina has agreed to a $4.65 billion cash payment to its main holdout creditors and will present the deal to Congress this week for a vote which would end 14 years of bitter legal battles and pave the way for its return to global credit markets.
  • Scotiabank hikes dividend as profit rises five per cent on gains in foreign banking (FinancialPost) Bank of Nova Scotia, Canada’s third-largest lender by assets, said fiscal first-quarter profit rose 5 per cent on higher earnings from its international business. Net income for the period ended Jan. 31 climbed to $1.81 billion, or $1.43 a share, from $1.73 billion, or $1.35, a year earlier, the Toronto-based bank said Tuesday in a statement. The lender raised its quarterly dividend 2.9 per cent to 72 cents a share.


Overnight markets

  • Overview: US 10yr note futures are up 0.0359% at 130-18, S&P 500 futures are up 0.67% at 1942.5, Crude oil futures are up 1.19% at $34.15, Gold futures are up 0.87% at $1245.2, DXY is down 0% at 98.207.

US Economic Data 

  • Markit US Manufacturing PMI will be released at 9:45 AM
  • ISM Manufacturing will be released at 10:00 AM
  • ISM Prices Paid will be released at 10:00 AM
  • Construction Spending MoM growth will be released 10:00 AM

Canadian Economic Data 

  • GDP MoM growth was 0.2%, better than expected by the analyst, and down 0.1% from prior year
  • GDP YoY growth number came in at a level of 0.5%, beating the analysts estimate, and at the same level than prior year
  • Quarterly GDP Annualized growth was 0.8% higher than expected and down 1.6% from Q3 2015
  • RBC Canadian Manufacturing PMI will be released at 9:30 AM



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, David Leclair-Legault

Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.

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