cti2015header-morning comments web

Market Update

US tsys shooting higher after stronger headline employment (227k vs 180k) yet weaker AHE with downward revision, , 10Y 2.45% (-3bps).  Quiet overnight session with mkts awaiting payrolls, Reaction in tsys was muted in Asia despite the PBOC tightening monetary policy in a surprise move. The JPY and JGBs were volatile as the BOJ stepped in to buy to control rising yields, having to step in twice as the first operation failed to stem the decline in JGB prices forcing the BOJ to pay thru the offered side for bonds. Euro govt bonds lower, peripheral yields higher, the bund curve continuing to bear steepen on concerns of rising inflation – Eurozone inflation rose to the highest in four years in Jan to 1.8% as measured by the MUICP flash estimate. GOCs higher post US payrolls. Two year Cda auction yest, new May 19s went well, the WI/2Y roll 0.2bps narrower @ 5.6bps – still looks cheap to us. Provis grinding tighter basically all week, Ont 26s trading up at 78 – no domestic supply and a well received 5Y global adding to positive momentum in Ont spds.

News headlines 

Dollar Advances With Stocks Before Payrolls Data: Market Wrap (Bloomberg) The dollar climbed and European stocks gained before a report economists forecast will show employment growth in the U.S. expanded at a faster pace in January. Bonds in Europe slid, while oil advanced. Bloomberg’s Dollar Spot Index rose, paring a sixth weekly decline, its longest losing streak since 2010. Europe’s Stoxx 600 index advanced and the region’s bonds dropped. Britain’s pound dropped against most of its major peers after growth slowed in the service industry amid surging costs.

China raises short-term interest rates in fresh tightening signal (Reuters) China’s central bank surprised financial markets on Friday by raising short-term interest rates on the first day back from a long holiday, in a further sign that it is slowly moving to a tighter policy bias as the economy shows signs of steadying. The People’s Bank of China (PBOC) said it raised the interest rate on open market operation reverse repurchase agreements (repos) by 10 basis points, effective on Feb. 3.

Oil pushes higher on worries over new U.S. sanctions on Iran (Reuters) Oil prices edged higher on Friday in response to the possibility of new sanctions on Iran after U.S. President Donald Trump said « nothing is off the table » in dealing with the country after its test launch of a missile.

Euro may be too weak for Germany but too strong for others (Reuters) In an attack on Germany, U.S. President Donald Trump’s top trade adviser said the euro was « grossly undervalued », a charge which may ring true for the German economy but not for the 19-member currency zone as a whole.

Gold Demand Rises to Three-Year High on Political Upheaval (Bloomberg) Gold demand rebounded to a three-year high in 2016 as investor concerns over political issues including Brexit spurred demand for a haven. Purchases through exchange-traded funds helped global demand climb about 2 percent to 4,309 metric tons last year, the World Gold Council said in a report Friday. The recovery in ETFs offset a decline in coin and jewelry demand and reduced buying by central banks.

Pound Falls as Services PMI Shows Loss of Momentum in Economy (Bloomberg) The pound extended its first weekly loss since early January after data showed that the services sector, one of the main engines of the British economy, is growing at a slower pace than expected.

Trump’s call to speed up NAFTA talks puts Canada on guard (GlobeandMail) U.S. President Donald Trump announced he wants to “speed up” renegotiation of NAFTA, an accelerated approach that could ramp up the bargaining pressure on Canada as the country tries to find a way to emerge unscathed from a rewriting of the rules of commerce with its largest trading partner.

Overnight markets 

Overview: US 10yr note futures are up 0.2764% at 124-23, S&P 500 futures are up 0.4% at 2284.5, Crude oil futures are up 0.45% at $53.78, Gold futures are down -0.28% at $1216, DXY is up 0.17% at 99.962, CAD/USD is down -0.05% at 0.7681.

US Economic Data 

8:30 AM Change in Nonfarm Payrolls, Jan, 227k, est. 180k (prior 156k,  revised 157k)
Change in Private Payrolls, Jan, 237k, est. 175k (prior 144k, revised 165k)
Change in Manufacturing Payrolls, Jan, 5k, est. 5k (prior 17k, revised 11k)
Unemployment Rate, Jan, 4.8%, est. 4.7% (prior 4.7%)
Average Hourly Earnings, m/m, 0.1%, est. 0.3% (prior 0.4%, revised 0.2%)
Average Hourly Earnings, y/y, 2.5%, est. 2.7% (prior 2.9%, revised 2.8%)
9:45 AM Markit US Services PMI, Jan F, (prior 55.1)
Markit US Composite PMI, Jan F, (prior 55.4)
10:00 AM ISM Non-Manufacturing Composite, Jan, est. 57.0 (prior 57.2)
Factory Orders, Dec, est. 0.5% (prior -2.4%)
Factory Orders Ex Trans, Dec, (prior 0.1%)
Durable Goods Orders, Dec F, est. -0.4% (prior -0.4%)
Durables Ex Transportation, Dec F, (prior 0.5%)
Cap Goods Orders Nondef Ex Air, Dec F, (prior 0.8%)
Cap Goods Ship  Nondef Ex Air, Dec F, (prior 1.0%)

Canadian Economic Data

There is no major economic data release for 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