03/03/2016

cti2015header-morning comments web

Market update

US tsys trading lower after fairly subdues session with little reaction to the 6k jump in initial claims & better than exp Q4 productivity (-2.2 vs -2.9). Euro stocks lower, Asian stocks higher for a second day, crude lower @ $34.40.   Aussie govt bonds lower with the 2Y ~15 bps higher since Monday’s RBA meeting followed by better than exp Q4 GDP. GOCs are unch, 1bp tighter vs tsys, longs trading heavy with 10/30 back above 80bps. Yest $400mln RRB 47 auction went very well , breakevens rallying ~9bps since yest with shorter RRBs lagging. The positive momentum in provis continuing after yesterday’s 2-3bp rally – Ont 26s are 108.5 from 112 at issue yest.

News headlines

  • ECB Brainstorms as Draghi Seeks Boost That Won’t Hurt Banks (Bloomberg) One week before a long-awaited stimulus decision, European Central Bank officials are privately deliberating over how to enhance their monetary policy stance without maiming its transmission. Committees studying how to mitigate the impact on banks have prepared potential measures that range from variations on a tiered deposit rate to techniques for countering the impact of stimulus on excess liquidity, according to people familiar with the discussions. The suggestions could still be rejected by the Executive Board or turned down at the Governing Council’s March 10 meeting. An ECB spokesman declined to comment.
  • European Stock Rally Runs Out of Steam; Oil Falls, Bonds Rise (Bloomberg) European stocks halted their longest rally since October, oil fell from an eight-week high and bonds in the region rose as investors awaited fresh indications of the strength of U.S. economic growth. A five-day winning streak in European stocks came to a stop, with the U.K.’s Whitbread Plc and Germany’s Evonik Industries AG falling after earnings. Standard & Poor’s 500 Index contracts were little changed. Italian, Spanish and Portuguese bonds climbed. Russia’s ruble weakened as Brent ended a three-day rally. Asian shares and currencies held gains along with industrial metals amid speculation of increased Chinese stimulus.
  • China Policy Moves Risk Property Price Bubble, PBOC Adviser Says (Bloomberg) China’s monetary policies have encouraged investors to pour money into real estate, inflating prices in cities such as Beijing, Shanghai and Shenzhen and increasing the risk that bubbles could form, central bank policy adviser Bai Chongen said in an interview. At the same time, smaller property markets are struggling with excess inventory, making it difficult to craft a unified policy response and requiring careful coordination with fiscal measures, he said Wednesday on the sidelines of a joint symposium hosted by the People’s Bank of China and the Federal Reserve Bank of New York in Hangzhou.
  • Scotiabank urges Ottawa to spend $20-billion in rapid stimulus (TheGlobeAndMail) Bank of Nova Scotia wants the federal government to pump $20-billion into economic stimulus by mid-2017 to help get Canada out of the economic funk sparked by the collapse in oil prices. That, Scotiabank said last night, would equal 1 per cent of gross domestic product and would play into its new economic forecast for GDP growth of 1.3 per cent this year and 2.5 per cent next.
  • Trudeau’s Message to World: Let Government Spending Do the Work (Bloomberg) Canadian Prime Minister Justin Trudeau is urging global leaders to rely more on government spending and less on monetary policy to spur growth as he prepares a budget that will push his country into deficit. In a wide-ranging interview Wednesday in Vancouver, Trudeau highlighted the importance of infrastructure spending and measures to bolster incomes of middle classes he says are critical to driving growth. He also defended his plan to go willingly into the red.
  • Fastest-Growing Region in the Americas Is Loving the Oil Slump (Bloomberg) The slump in raw materials prices that has hurt Brazil, Chile, Peru and Colombia is leaving Central America unscathed. The region is bucking a trend of sluggish growth in the rest of Latin America as cheaper crude prices cut its fuel bills and faster growth in the U.S. boosts remittances and tourist spending. The region will grow by 4.2 percent this year, led by Panama’s 6.3 percent expansion, according to forecasts from the International Monetary Fund. That compares to an 0.8 percent growth forecast for Latin America as a whole.
  • S. fourth-quarter productivity revised to show a less steep decline (Reuters) U.S. nonfarm productivity fell less steeply than previously thought in the fourth quarter, but still pushed up labor-related costs as companies employed more workers to raise output. The Labor Department said on Thursday that productivity, which measures hourly output per worker, decreased at a 2.2 percent annual rate and not the 3.0 percent pace it reported last month. It was still the biggest drop since the first quarter of 2014. Economists polled by Reuters had expected fourth-quarter productivity would be revised to show it contracting at a 3.2 percent rate. Productivity increased at a 2.0 percent rate in the third quarter and rose only 0.7 percent in 2015 – the smallest gain since 2013.

 

Overnight markets

  • Overview: US 10yr note futures are down -0.0483% at 129-9, S&P 500 futures are down -0.1% at 1981.5, Crude oil futures are down -0.69% at $34.42, Gold futures are up 0.18% at $1244, DXY is down -0.24% at 97.974.

US Economic Data 

  • Initial Jobless claims was at a level 278k weaker than expected by the analysts and up 6k from prior week
  • Continuing Claims number came in at a level of 2257k, worse than the analyst estimate and up 4k from prior week.
  • Markit US Services PMI will be released at 9:45 AM
  • Markit US Composite PMI will be released at 9:45 AM
  • ISM Non-Manufacturing Composite index will be released at 10:00 AM
  • Factory Orders will be released at 10:00 AM
  • Durables Goods Orders will be released at 10:00 AM
  • Durables Goods Ex Transportation will be released at 10:00 AM

Canadian Economic Data 

  • There is no major economic data 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