Market Update
Tsys paring back gains, thou still higher after better than expected ADP 235k and stronger rise in ULC 2.5% vs 2.1% exp. , 10Y 2.855 (-3bps), heavy volume in TY (>700k). S&P futures clawed back from steep losses following the announcement of Gary Cohn’s resignation, still down 16 pts (-0.63%), were down as much as 43 pts overnite. GOCs higher, undeforming tsys for a second day before the BOC later this morning. BOC expected to stand pat with heightened event risk adding to the narrative of an economy that lost a good deal of momentum last qtr. Provis another 1bp wider, Ont 48 77.5/76.5, QC 48 75.5/74.5, Q/Ont 48 -2.0 unch. CHoice Properties 2 tranche $1.3bln deal yest putting additional pressure on spds, with bank supply expected to pick up to fund March maturities.
News headlines
Gary Cohn to Resign as Trump Adviser After Dispute Over Tariffs (Bloomberg) Gary Cohn is resigning as President Donald Trump’s top economic adviser, leaving his post as the administration prepares to impose steep tariffs on steel and aluminum that Cohn has opposed. Cohn didn’t mention the dispute in a statement distributed by the White House, saying only that “it has been an honor to serve my country and enact pro-growth economic policies to benefit the American people, in particular the passage of historic tax reform.”
EU Signals Mounting Concern Over Trump Tariffs as Cohn Resigns (Bloomberg) The European Union voiced mounting concern over U.S. President Donald Trump’s plan to impose punitive import tariffs, as Germany signaled alarm over the resignation of pro-trade Trump adviser Gary Cohn in an emerging trans-Atlantic dispute over protectionism.
Global Stocks Drop on Trade Gloom; Bonds Advance: Markets Wrap (Bloomberg) The prospect of escalating protectionism depressed European and Asian stock markets on Wednesday as President Donald Trump’s plans to punish foreign imports appeared to gather force. U.S. equity futures slumped, while most government bonds climbed.
Hammond Demands Brexit Trade Deal for Banks in Challenge to EU (Bloomberg) The European Union needs the U.K.’s world-leading financial services industry to stay strong after Brexit, Chancellor of the Exchequer Philip Hammond will say, as he warns “skeptics” there’s no excuse for blocking a deal. In a tough message aimed at European politicians who have previously ruled out such a deal, Hammond will insist that every trade agreement the bloc strikes is unique — and the Brexit accord should be “so much better” than any other.
Oil Dips on Forecast for Rising Stockpiles, Trump Trade-War Risk (Bloomberg) Oil dropped for the first time in four sessions on a reported expansion in U.S. crude inventories and the risk of an intensifying global trade war sparked by President Donald Trump. Futures in New York fell as much as 1.3 percent. U.S. stockpiles rose by about 5.7 million barrels last week, the American Petroleum Institute was said to report. Broader financial markets were also rattled after Gary Cohn said he’ll resign as economic adviser to the White House, while the Trump administration is said to be considering clamping down on Chinese investments in the U.S.
CN Rail to invest C$250 million to clear Western Canada grain backlog (Reuters) Canadian National Railway Co said on Wednesday it would invest more than C$250 million ($193 million) this year to improve its infrastructure to ease grain supply issues in Western Canada. CN Rail, once considered the standard in railroad efficiency, has struggled with capacity constraints amid growing demand from the Western Canada grain market. The company on Monday installed Jean-Jacques Ruest as its interim chief executive after Luc Jobin stepped down abruptly.
TSX futures dip on U.S. protectionism worries (Reuters) Canada’s main stock index futures fell on Wednesday after White House economic adviser Gary Cohn resigned, stoking fears President Donald Trump would go ahead with tariffs. Cohn, the top economic adviser to Trump and a voice for Wall Street in the White House, said on Tuesday he would resign, a move that came after he lost a fight over Trump’s plans for hefty steel and aluminum import tariffs.
Canada well-positioned to handle turmoil over NAFTA talks: Finance minister (BNN) A strong economy is allowing Canadian officials to push for a better deal in negotiations on the North American Free Trade Agreement, Finance Minister Bill Morneau said Tuesday. Talks on the deal are « critically important » but Canada will remain firm in getting the best possible agreement, he told the Business Council of British Columbia. « Are there challenges? Yes. Do we need to be prepared to deal with them? Yes. We think that having our economy in the best possible position is the place from which we can do that, make decisions in a measured way, considering all the facts at hand, » he said.
Overnight markets
Overview: US 10yr note futures are up 0.104% at 120-05, S&P 500 futures are down -0.54% at 2709.25, Crude oil futures are down -0.43% at $62.33, Gold futures are down -0.31% at $1331, DXY is down -0.04% at 89.578, CAD/USD is up 0.27% at 0.7745.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 1.769% | 2 Year | 2.242% |
| 5 Year | 2.034% | 5 Year | 2.633% |
| 10 Year | 2.221% | 10 Year | 2.866% |
| 30 Year | 2.387% | 30 Year | 3.141% |
US Economic Data
| 7:00 AM | MBA Mortgage Applications, Mar 2nd 0.3% (2.7% prior) |
| 8:15 AM | ADP Employment Change, Feb 235k est 200k (234k prior) |
| 8:30 AM | Nonfarm Productivity, 4Q 0.0% est -0.1% (-0.1% prior) |
| Unit Labor Cost, 4Q 2.5% est 2.1% (2.0% prior) | |
| Trade Balance, Jan -56.6b est -55.0b (-53.1b prior) | |
| 14:00 PM | US Federal Reserve Releases Beige Book |
| 15:00 PM | Consumer Credit, Jan est 17.650b (18.447b prior) |
Canadian Economic Data
| 8:30 AM | Labor Productivity QoQ, 4Q 0.2% est 0.1% (-0.6% prior) |
| Int’l Merchandise Trade, Jan -1.91b est -2.50b (-3.19b prior) | |
| 10:00 AM | Bank of Canada Rate Decision, Mar 7th est 1.25% (1.25% prior) |
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, Hugues Savard
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230