Market update
Tsys lower after Feb payrolls came in better than exp despite lower wage growth, US 10Y 1.86 (+2bps). Risk on session o/n with European equities higher, USD lower, crude unch. Core European bonds lower, German 10Y bund 3bps higher @0.20% – according to MNI story there is no consensus on further easing measures next wek beyond a ‘plain vanilla’ rate cut (10bps). Tsy futures confined to tight range before payrolls, volume lighter than avg (~270k TY1 contracts). GOCs lagging the pullback in tsys after rally yest saw spds close 1-2 bps tighter except in longs which lagged. The 10/30 curve closed 2bps wider @81, unwinding of hedges vs provi & corp supply supported tens. The long awaited Sask 10Y came @120 (onts +3) and met with good demand, selling out quickly. Quebec took advantage of the positive tone to issue $500mln in reopened 22048s @ 119.5 (onts +3.5). TD issued $1.5bln in 5Y deposit notes @ 136.3 (guidance was 139 +/- 3) – the bonds closed 130/127.
News headlines
- Payrolls in U.S. Surge While Wages Drop in Mixed Jobs Report (Bloomberg) Employers added more workers in February than projected but wages unexpectedly declined, dashing hopes that reduced slack in the labor market was starting to benefit all Americans. The 242,000 gain followed a 172,000 rise in January that was larger than previously estimated, a Labor Department report showed Friday. The jobless rate held at 4.9 percent as people entered the labor force and found work. Average hourly earnings dropped, the first monthly decline in more than a year.
- Global Stocks Advance With Copper on China Stimulus Speculation (Bloomberg) Stocks climbed around the world as emerging markets extended their best week since October and copper advanced on speculation China will boost stimulus at an annual gathering of the nation’s legislature. Treasuries were little changed before U.S. jobs data. Glencore Plc was among the biggest gainers on the Stoxx Europe 600 Index and credit markets strengthened as copper led metals higher and gold extended gains after entering a bull market. Chinese equities rose for a fourth day, with state-backed funds said to have intervened in the market ahead of the National People’s Congress on Sunday.
- China’s premier says economy faces greater difficulties in 2016: state radio (Reuters) China’s economy is facing greater difficulties and challenges in 2016 as the government forges ahead with structural reforms, state radio on Friday quoted Premier Li Keqiang as saying. The government will keep economic growth within a “reasonable range” this year, Li said
- Economist: For The ECB, It’s No Longer About Oil (Bloomberg) Inflation in the euro area came in at 0.2 percent in February, piling further pressure on policymakers at the European Central Bank ahead of next week’s monetary policy meeting. While the largest component of the price fall in the common currency zone remains energy, the ECB is becoming increasingly concerned about second round effects and the prospect of the oil-price collapse pushing the euro area into deflation.
- Tsipras Must Purge Cabinet to Lift Economy, Greek Industry Says (Bloomberg) Greek Prime Minister Alexis Tsipras desperately needs more competent officials in his administration to attract greater investment in the country and put the economy on firmer footing, according to the head of the main Greek business group. Theodore Fessas, chairman of the Athens-based Hellenic Federation of Enterprises, said most Greek ministers should be replaced by people with technical knowledge and reform credentials. Otherwise, he said, Greece will struggle to enact overhauls required under its 86 billion-euro ($94 billion) international aid program and to restore economic growth.
- Brazilian Real, Stocks Rally as Traders Root for Impeachment (Bloomberg) Brazil’s real led global gains and stocks rallied as traders bet that a change in government may be closer than ever after months of political gridlock that has prevented lawmakers from focusing on kick-starting the stalled economy and closing a crippling budget gap. The rally was triggered by news that the federal police had raided the house of former President Luiz Inacio Lula da Silva, fueling speculation that support will grow to impeach his mentee and successor, President Dilma Rousseff. While markets have been split in the past about whether a Rousseff ouster would be good or bad, many now say it may be the only way out of the political quagmire.
Overnight markets
- Overview: US 10yr note futures are down -0.0362% at 129-15, S&P 500 futures are up 0.05% at 1991.5, Crude oil futures are up 0.43% at $34.72, Gold futures are up 0.21% at $1260.8, DXY is up 0.21% at 97.8.
US Economic Data
- Change in Nonfarm Payrolls was released at 242k, stronger than expected and up 91k from prior month
- Change in Manufacturing Payrolls number came in at a level of -16k, weaker than the analyst estimate and down 45k from the previous month
- Underemployment Rate was released at 4.9%, at the same level than expected.
- Average Hourly Earnings growth was released at a level of -0.1% missing the estimate and down 0.6% from prior month.
Canadian Economic Data
- Labor Productivity QoQ growth was released at level of 0.1%, stronger than expected.
- Ivey Purchasing Managers Index will be released at 10:00 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