Market update
US tsys are higher, curve flatter as crude continues to decline for a second day, European stocks weaken, US 10Y 1.925 (-2.3bps). Core Euro bonds higher, German 10Y bund yield 3 bps lower @0.32% & curve 2bps flatter despite German unemployment falling to record low 6.2% last month. Weakness in energy stocks after BP reported $5.2bln annual loss its worst in twenty years while Exxon earnings came in above exp the stock falling ~1.0% pre mkt. GOCs opening higher led by 10s, with the 10Y butt ~3bps narrower. Provi spds opening unch despite ‘risk off’ and after closing 1bp better yest. Ont 26/25 roll continues to expand, now 2.7/2.5.
News headlines
- BP reports biggest ever annual loss (Reuters) BP slumped to its biggest annual loss last year and announced thousands more job cuts on Tuesday, showing that even one of the nimblest oil producers is struggling in the worst market downturn in over a decade. The British oil and gas company, which is still grappling with about $55 billion of costs from the oil spill in the Gulf of Mexico in 2010, said it would cut 7,000 jobs by the end of 2017, or nearly 9 percent of its workforce. BP said it lost $6.5 billion in 2015 and its fourth-quarter underlying replacement cost profit, which is the company’s definition of net income, came in at $196 million, well below analyst expectations of $730 million.
- Eurozone unemployment at lowest since September 2011 (FT) Greece and Spain may still have unemployment rates that are well over 20 per cent but the jobless rate for the eurozone as a whole is at lows not seen since the autumn of 2011, thanks to a robust jobs market in countries such as Germany. The unemployment rate for the euro area edged down further to 10.4 per cent in December, the lowest since September 2011, from 10.5 per cent the previous month. This was better than expected by economists who had forecast it to remain at 10.5 per cent.
- Australia central bank holds rates, hopeful on growth (Reuters) Australia’s central bank held its cash rate at 2.0 percent on Tuesday and reiterated that the outlook for restrained inflation meant there was scope for a further cut if needed to support the economy.
- Alphabet Reports Rising Profits at Core Google Businesses (WSJ) Google parent Alphabet Inc. reported strong growth and rising profitability at its main Internet business, sparking an after-hours rally that propelled it past Apple Inc. as the world’s most-valuable company. Alphabet, after a corporate reorganization late last year, disclosed that revenue at Google’s core Internet businesses, including search, YouTube and Android, rose 14% last year, to $74.54 billion, from $65.67 billion in 2014. Yearly operating income for these businesses totaled $28 billion, excluding stock-based compensation, up 23% from $22.69 billion a year earlier.
- India’s Central Bank Leaves Key Lending Rate Unchanged (WSJ) Reserve Bank of India Governor Raghuram Rajan left the country’s main interest rate unchanged Tuesday, saying the central bank would watch how inflation behaves and called upon the government to take growth-supportive measures in the federal budget later in the month.
- Brexit May Lose U.K. Billions in Funding for Climate, Renewables (Bloomberg) The U.K. risks losing out on billions of pounds of investment in renewable energy projects such as wind farms and grid upgrades if it quits the European Union and ditches its stake in the European Investment Bank.
- S&P Lowers Shell’s Rating, Puts Other Oil Majors on Watch (Bloomberg) Royal Dutch Shell Plc had its debt rating cut to the lowest since Standard & Poor’s began coverage in 1990, and downgrades of several other major European oil and gas companies will probably follow in coming weeks.
- Global stocks snap winning streak as oil pressure returns (Reuters) World stocks dipped after a three-day run of gains and emerging markets were back under pressure on Tuesday, as a sharp drop in oil prices following lacklustre economic data sparked renewed nerves
- Yen rises as global mood sours again (Reuters) The yen inched higher on Tuesday as another drop in oil and stock markets sent investors back to traditional safe havens, hammering commodity-dependent currencies in the process.
Overnight markets
- Overview: US 10yr note futures are up 0.42% at 129-23, S&P 500 futures are down -1% at 1912, Crude oil futures are down -3.83% at $30.41, Gold futures are down -0.1% at $1126.9, DXY is down-0.12% at 98.89.
US Economic Data
- There is no major economic data today.
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, David Leclair-Legault
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230